Demand for packaged gold rings spikes
by Thien Ly
More than 10 days after Decree No 24/2012/ND-CP on the management of gold business activities took effect the domestic market has seen some significant changes.
Under the decree, the purchase or sale of gold bars by organisations and individuals shall be done only at credit institutions and enterprises licensed by the central bank to trade in gold bullion.
Since this regulation took effect on January 10, the number of gold bar transaction points fell from 8,000 to 2,500 nationwide. More significantly, the gap between local and global gold prices narrowed from over VND5 million to about VND3 million per tael at present.
However, one of the market's biggest changes has been that packaged gold rings have replaced gold bars, with transactions increasing manifold at gold shops.
The gold rings carry 24-carat certification, the enterprise's seal and are packaged like gold bars. The packaged gold rings are priced slightly lower than the rate of SJC gold bars.
A gold shop in Tan Binh District' Pham Van Hai Market sells between 30 and 35 gold rings, equivalent to 3 or 3.5 gold taels, every day. This is nearly double the sales before Decree 24 took effect.
The Phu Nhuan Jewellery Company sells about 300 packaged gold rings a day, five or six times higher than earlier.
It can be seen that demand for packaged gold rings has risen sharply in areas that do not have establishments licensed by the central bank to trade in gold bars.
The main explanation being given by market observers for this change is that trading in gold bars now has become very difficult, particularly for those living in rural and remote areas, so many people are deciding to buy the gold rings to keep as assets. It has been a long-standing habit for Vietnamese households to store gold as a safe asset that will not get devalued, unlike currencies.
Major gold traders including Sai Gon Jewelleries Company (SIC), Phu Nhuan Jewelleries Company and Bao Tin Minh Chau Gold and Silver Company have begun selling packaged gold rings to meet customers' demand.
Soon after the spike in demand for packaged gold rings, the central bank has asked enterprises with large sales volumes to report on production and sales as required.
The shift from gold bars to gold rings can be considered the market's reaction over the central bank's gold business management policies. These new polices have made trading of gold bars more complicated and people still want to keep gold as a safe asset.
Under current laws, the purchase and sales of packaged gold rings is still legal, since it is considered jewelry and not bullion.
However, a central bank official has said that the bank would closely watch this phenomenon (of trading in packaged gold rings) and issue "warnings" as it finds necessary.
For now, it advises individuals who want to purchase packaged gold rings to exercise caution as their quality as well as weight cannot be fully guaranteed.
Egg prices take off
Between January 4 and 11, Thailand's CP Vietnam Corp, one of the country's biggest poultry suppliers, suddenly hiked egg prices by 37 per cent from VND21,500 to VND29,000 (US$1.4) for a carton of 10 eggs.
Earlier, between December and January 11, Malaysia's Emivest had hiked their egg prices by 30 per cent from VND19,200 to VND25,600 ($1.2)
The companies explained their sharp price hikes by saying it was due to a supply shortage of poultry eggs on the market.
The price hikes destabilised the market and worried customers at a time they were facing many difficulties due to the prolonged economic crisis. There were strong protests against the companies' actions from the public as well as authorised agencies.
Market management agencies in HCM City showed that egg supply had not reduced but had even increased in the market, hence the price hike was unjustified. The Ministry of Industry and Trade has also rejected the companies' explanations and provided statistics indicating normal supply.
Saigon CoopMart as well as some other major retailers had to stop selling eggs supplied by CP as they were selling the essential commodity under the city's price stabilisation programme.
Faced with a barrage of criticism, the companies have backtracked and admitted their actions have been unreasonable. They have also been forced to lower their prices.
On January 16, CP admitted to wrongfully increasing the egg prices and cut them to VND21,000 per (10-egg) carton. The same day, Emivest lowered its prices to VND23,200 for a 10-pack and to VND20,200 by January 19.
Although CP and Emivest have already adjusted their egg prices in line with the market rates, they still face penalties for violating the Law on Competition.
CP has written to the HCM City Department of Industry and Trade, saying that it only holds a 16 per cent share in the local egg market in an attempt to avoid being sanctioned under the Competition Law.
The Viet Nam Competition Authority under the Ministry of Industry and Trade has decided to conduct an investigation to estimate the actual market share of these two firms.
Under the Competition Law, the authorities only need to collect sales invoices of CP and Emivest at a local tax department or a supermarket to determine the percentage of its sales revenue in the local market compared to other companies. The inspectors in this case will be the tax departments in localities where factories of both companies are based.
After the investigation, it will take a few months until the official conclusions come out. However, if proven guilty, CP and Emivest would be subject to penalties of up to 10 per cent of their total revenues in the previous financial year (2011). The most severe punishment for CP and Emivest would be deprivation of the right to do business for a certain time.
Quick and strong reactions from authorised agencies, the media and active boycott by retailers forced CP and Emivest to give up on their plan to make bulky profits from egg price hikes, and also prevented the possibility of increasing the price of other products.
At present 20 foreign invested companies account for 70 per cent of the local animal feed market and three foreign firms cover 30 per cent of the poultry breeds market. As a result, over the last several years, these two markets have seen continuous price increases, causing many difficulties for both breeders and consumers.
There is deep concern that if the domination of foreign firms is not tackled by effective, timely measures, it is not only the prices of eggs, animal feed and poultry breeds that will rise uncontrollably, but also that of several other livestock and dairy products like meat and milk. Some local experts have called for policies to support the development of domestic livestock breeding companies to reduce the market's reliance on foreign firms.
More major IPOs on the way
Dozens of corporations under the control of the ministries of Transport and Construction will hold their IPOs (Initial Public Offering) this year to restructure them into shareholding companies.
Vietnam Airlines Corporation, Viet Nam National Textile and Garment Group (Vintex), and Vietnam Glass and Ceramics for Construction Corporation (Viglacera) are among the big names that will go public this year.
Under its recently approved restructuring plan, Vietnam Airlines will make an initial public offering (IPO) this year and offload stakes in 10 businesses from now through 2015. The Government will own 65-75 per cent of the airline after the IPO, less than the initially estimated percentage of between 70 and 80 per cent.
After being equitised, Vietnam Airlines will have a parent company and nine dependent companies and 26 independent units. It will continue to fully own the Vietnam Airlines Engineering Company. It hopes to become Southeast Asia's third largest airline, providing four-star services by 2015.
It expects to achieve a turnover of about $43.5 billion from air transportation and pre-tax profits of $1.08 billion by 2020.
Vinatex's IPO is predicted to be carried out in June this year. However, information about what percentage of its stock will be held by the Government has not been released.
The equitisation of Vinatex's subsidiaries such as Phong Phu Corp, Viet Tien, Nha Be and Hoa Tho is almost complete. As planned, Vinatex will offload all capital from non-core investments before 2015. The capital withdrawn will be used to develop its key areas such as production and trading of cotton, fiber, woven fabric, knitted fabric, garments and fashion accessories.
Vinatex's dividend of between 12 and 15 per cent is considered to be higher than State-owned enterprises in other industries.
Viglacera has planned to make its IPO in September this year with 20 per cent of its stake to be sold to the public. In 2012, its pre-tax profit was VND121 billion ($5.81 million).
With such attractive bottom-line figures, the company's equitation is expected to happen smoothly.
The IPOs of Vietnam Airlines, Vinatex and Viglacera are also expected to bring in new and attractive commodities to the domestic securities market, thus making it more attractive to both domestic and overseas investors.
However, many local economists are concerned about the IPOs of major state-owned corporations being held this year since Viet Nam's economy is yet to show signs of recovering from the ongoing slump. Therefore, the economists are worried that the State assets, which are public property, will be sold off at cheap prices. — VNS