Businesses believe that if pepper is put on the stock exchange, this commodity will be easily manipulated by financial funds because its output is still low compared to other commodities, such as coffee.
In this draft of the Ministry of Industry and Trade, one of the general principles when building a Commodity Exchange is to enhance transparency, fairness and equality. Fraudulent acts, market manipulation, insider trading, abuse of monopoly position, and market dominance that negatively impact the relevant market are all prohibited or handled with the highest level of administrative sanctions.
Systems and Rules for organizing, operating and participating in the futures market must be the subjects establish and improve to control, minimize and handle risks in the market, to limit excessive speculation and prevent systemic risks as prescribed by law.
Some businesses believe that putting pepper on the stock exchange needs to be done carefully because there are many risk factors, including speculation, which negatively impact market stability.
Talking to us, Mr. Le Duc Huy, General Director of Dak Lak 2-9 Import-Export Company Limited (Simexco Dak Lak), one of the enterprises export Vietnam’s major pepper traders said that they should be very careful when trading pepper on the exchange because speculative risks will increase significantly.
He gave an example from coffee – the commodity is being traded on world exchanges, currently also being controlled by hedge funds, financial funds despite the very large output. Meanwhile, pepper output is not much, so it is easier to be coordinated. If there is intervention by large hedge funds, the price will fluctuate not according to the supply and demand of the real market and the price will fluctuate very strongly.
“Coffee For example, many times the price of 30,000 – 31,000 VND/kg lasted for 2 – 3 years even when coffee production decreased but still could not increase. Therefore, the pepper floor must be very careful. If intervened by financial funds, the benefits will not outweigh the harm”, Mr. Huy said.
According to VPSA, Vietnam’s pepper output in 2024 is expected to reach about 170,000 tons. Meanwhile, for coffee, according to the Vietnam Coffee – Cocoa Association, the output in the 2023 – 2024 crop year is about 1.5 million tons, many times higher than that of pepper.
Similarly on a world scale, pepper output is about 465,000 tons while coffee is about 10.2 million tons.
Sharing this concern, at the VPSA conference, Mr. Ho Tri Nhuan, Director of Gohan Company, said that with the current pepper market situation, the absence of a trading floor is better than having one.
Without a commodity exchange, farmers, traders and exporters can decide on the buying and selling prices. But if there is an exchange, the “financial forces” can push enterprises into an “extremely difficult” situation because the speculative nature of the funds is very large.
“Currently, pepper is simply bought and sold in physical form. Domestic speculation in just a few months has caused disruption and damage, let alone “paper goods”. This has caused extremely serious consequences,” said Mr. Nhuan.
Domestic pepper prices have increased sharply this year. As of August 23, pepper prices were trading at around VND143,000/kg, nearly double the price at the beginning of the year.
Mr. Lam Hoang Quoc Khoi – Market research specialist of Nedspice Vietnam Company, warned that putting pepper on the trading floor could become an “official casino” if there is no appropriate management solution.
“Before, when I read the trading principles on the floor, I thought it was good, but in reality, with the coffee floor, the more it gets, the more it becomes degenerate, becoming a casino, where people will bet that the price of coffee will go up or down and the amount of money put into that floor is 5 times larger than the real transaction.
The government needs to consider solutions to prevent this from becoming an official casino. The capitalization of the pepper industry is lower, only 1/6 of that of coffee. Meanwhile, the coffee industry is manipulated like that, but with a small capitalization like the pepper industry, it is much easier to manipulate,” Mr. Khoi said.
According to DN&KD
