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Vietnam: Buyers reap high profits as gold sells at exorbitant rates
The wide gap between domestic and world gold prices has caused buyers to lose money, but helped gold smugglers earn lucrative, but illegal, profits.
The domestic bullion gold market in recent years has not seen wild fluctuations in prices per tael each day. However, the gap between the domestic and international prices is still wide, up to VND10-18 million per tael.
Despite the big price gap, gold consumption in Vietnam is still among the highest in the region and the market is still bustling, though many of the transactions are not carried out in the open air.
A report from the World Gold Council (WGC) showed that Vietnam bought 41 tons of gold in 2022, an increase of 32 percent compared to 2021. It is also the leading country in the region in terms of growth demand for gold.
In the fourth quarter of 2022, Vietnam bought 9 tons of gold, up 48 percent. The strong growth was seen in both bullion and jewelry gold. The demand for jewelry gold increased sharply.
With the current international price of VND55.4 million per tael, Vietnam had to spend VND60.419 trillion, or $2.6 billion, to import 41 tons of gold.
Meanwhile, with the retail price of VND67 million per tael in the domestic market, the total value of imports was VND73.07 trillion, or $3.1 billion. The gap was $500 million for 2022.
The demand for jewelry gold in the domestic market is increasing, together with the expansion of many well-known brands, such as SJC, PNJ and Doji.
Since 2012, the domestic gold market has been managed by Decree 24/2012, under which bullion gold is exclusively manufactured by the state.
The State Bank of Vietnam (SBV) is the agency assigned to manage the activities of producing bullion gold. SBV chose SJC bullion gold as the national bullion gold brand.
This could be the reason behind the widening of the gap between the domestic and international gold prices which causes buyers to lose money. This also helps smugglers earn illegal profits.
Most recently, Le Xuan Tung, chair of Phu Quy Gold Investment JSC, has been prosecuted for evading tax for smuggling 3 tons of gold worth VND5 trillion. With the gap between the domestic and international gold prices of VND11 million per tael, and other kinds of fees, the amount of illicit profit he pocketed was trillions of VND.
While the jewelry gold market is developing well internationally, in Vietnam, enterprises cannot import gold materials. Enterprises buy gold in the market.
Who is dominating the bullion, jewelry gold market?
SJC, Phu Nhuan Jewelry, Doji, Bao Tin Minh Chau, Bao Tin Manh Hai and Phu Quy are the best known gold trading companies in Vietnam.
Though the consumption level is high, the Vietnamese gold market is relatively fragmented with the larger market belonging to traditional gold shops.
The companies with large networks of shops spread throughout the country, such as PJN, Doji and SJC, are expanding their market share, but just account for 30 percent.
In terms of market share, SJC is leading in revenue. However, considering profits, PNJ is No1.
In 2018, PNJ made a profit of VND960 billion, which was several times higher than the profits of both Doji and SJC combined. The profits of Doji (holding company) and SJC were just tens of billions of VND.
The Vietnamese gold market has been growing rapidly in the last few years, especially in the jewelry market segment with dozens of tons of products consumed every year.
In terms of gold trading, Doji’s revenue has surged eight times over the last 10 years, from VND11 trillion in 2009 to VND90 trillion in 2019. Doji is included among the top 5 largest private enterprises in Vietnam.
Meanwhile, SJC reported a growth rate of 54 percent in revenue to VND27.154 trillion ($1.1 billion) and post-tax profit of 12 percent to VND48.6 billion.
According to the financial report of the holding company, Phu Nhuan Jewelry will have revenue of VND38.611 trillion ($1.6 billion) in 2022, a sharp rise from the VND22.094 trillion in 2021. The post-tax profit reached VND1.775 trillion, higher than the VND1.055 trillion in 2021.
Despite the high reported revenue, analysts pointed out that gold companies are facing big difficulties, especially in the jewelry segment due to the problems in input materials and the high prices in the domestic markets.
Nguyen Tri Hieu, a respected economist, commented that the policies applied by the central bank could help prevent the ‘goldenization’, but they are not helpful in current conditions. Meanwhile, the big price gap is putting difficulties for people and enterprises.
Duy Anh
Source: https://vietnamnet.vn/en/buyers-reap-high-profits-as-gold-sells-at-exorbitant-rates-2159720.html