UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ---------- Truong Trung Tai FACTORS AFFECTING INTENTION TO INVEST IN GOLD: EVIDENCE FROM HO CHI MINH CITY, VIETNAM MASTER OF BUSINESS Ho Chi Minh City – Year 2016 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ----------- Truong Trung Tai FACTORS AFFECTING INTENTION TO INVEST IN GOLD: EVIDENCE FROM HO CHI MINH CITY, VIETNAM ID: 60340102 MASTER OF BUSINESS SUPERVISOR: DR. PHAM PHU QUOC Ho Chi Minh City – Year 2016 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 3 Master Thesis FACTORS AFFECTING INTENTION TO INVEST IN GOLD: EVIDENCE FROM HO CHI MINH CITY, VIETNAM Truong Trung Tai University of Economics HCMC International School of Business LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 4 Table of Contents Acknowledgement .1 Gold as a global feature asset .2 Demand for gold in Vietnam. Objectives and Aims. Significance of research.
17 Chapter 2: Review of Literature. Intention to invest in gold. Factors affect intention to invest in gold. Economic benefits of investing.
Macroeconomic unexpected concern. Convenience to invest. 27 Chapter 3: Method and Data. Data Analysis steps.
35 Chapter 4: Data Analysis and Results. 36 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Data reliability test with Cronbach’s Alpha. Exploratory Factor Analysis (EFA).
Discussion of findings. 60 Appendix B: Codified variables. 63 Appendix C: EFA results of independent and dependent variables. 66 Appendix D: Regression results.
72 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 6 List of tables Table 1: Sample specification. 36 Table 2: Cronbach’s alpha of measurement scales. 39 Table 3: EFA results. 41 Table 4: Correlations of variables.
44 Table 5: The ANOVA analysis. 45 Table 6: Regression results. 46 Table 7: Summary of hypothesis testing. 47 List of figures Figure 1: Top 30 countries/organization holding gold as reserve assets (tonnes).
10 Figure 2: World gold demand in period 2000-2015. 11 Figure 3: World gold price period 1970-2015. 11 Figure 4: Gold ETF holding in global market. 12 Figure 5: Gold demand in selected countries.
13 Figure 6: Vietnam gold demand period 2000-2015. 14 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 7 Acknowledgement I would like to express my sincere thankfulness to my research advisor, Dr. Pham Phu Quoc, who has guide me and gave me possibility to complete this thesis. I am sure that this thesis would not have been possible without his support.
I also thank Prof. Nguyen Dinh Tho for his expert, valuable guidance, insightful comments, and encouragement extended to me. I would like to express my gratitude to all ISB staffs that supported necessary materials and assistance. Especially, I would like to give my special thanks to my parent who gave me invaluable advices and motivation in my life.
Truong Trung Tai LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 8 Abstract According to World Gold Council 2015 report, Vietnam is one of top gold consuming countries. The impact of gold on Vietnam economy is uncontroversial. This study aims to investigate the factors affecting people’s intention to use gold as investment instrument. With the sample of 247 individuals in HCMC, the results show that three factors (Economic Benefits, Macroeconomic Concern, and Perceived Insecurity) impact significantly on Intention to Invest in gold.
Keywords: gold, investment behavior, Vietnam, determinants, reasoned action approach. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 9 Chapter 1: Introduction 1.1 Gold as a global feature asset Historically, people are using gold in decoration and reserve assets since thousands year ago. Gold is a noble metal with special specifications: eternal shiny color over time because it does not oxidize, the valuable material because gold is the most malleable and ductile of all the metals, and especially gold is rather scarce with estimating gold in the earth around 170,000 tones. Gold was first used as jewelry in 3000 B.C at Middle Eastern.
After 1500 years, the Shekel, first form of gold coin, was used as standard of trading and exchange for goods in area.C, gold was used as form of money in China, a big country of ancient Asia land. Since the beginning of 18th century until the shutdown of Bretton Wood regime in 1970s, gold is used as international standard for conducting transactions and currency exchange around the world. In global context, gold is accepted as “real money”, unlike other legal tender currency have to depend on the political and economic influence of issuing country for secure its value. This is the reason why most of central banks always keep a portion of gold in their foreign reserve.
The United States not only as a strongest economy, is also a country holds the largest gold stock in their treasury. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 10 Figure 1: Top 30 countries/organization holding gold as reserve assets (tones) Source: World Gold Council, 2015 Gold is also used for industrial materials, religious customs as well as to represent wealth and power around the world (Bernstein, 2000). Because of its usefulness, the intrinsic value of gold still maintain high and irreplaceable. Gold demand in global market is increasing because of recent chaos in international financial market, as well as some war risk around the world.
Gold prices increased continuously since the dot-com collapse in the year 2000. Then gold price was supported by a series of economic crises followed, such as “the global financial crisis in year 2008”, “the Greek public debt crisis in year 2010”. Its reach the peak at more than 1650 USD / ounce in the year 2012, then gold price decreases after the recovery of the US economy was confirmed. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 11 Figure 2: World gold demand in period 2000-2015 Source: Thomson Reuters Figure 3: World gold price period 1970-2015 Source: Thomson Reuters LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 12 Gold is widely accepted as investment instrument, sometimes called “safe haven”.
Investment in gold account for more than one-third of total demand for gold in global market (World Gold Council, 2015). This show that gold has been a favored choice for international investor to diversify their portfolios against uncertainties of global economies. In general, there are several ways to participate in gold investment, physically and non-physically. Particularly, one can directly buy or sell gold bar in gold direct markets such as jewelry stores, banks, or some financial service companies etc.
An other way, they can also participate in some exchange to purchase gold exchange-traded funds (ETFs) which is a investment vehicle like company share, they are listed in public exchange and their value is associated with gold price in the market. Others Asia Europe North America Figure 4: Gold ETF holding in global market Source: Bloomberg LUAN VAN CHAT LUONG download : add luanvanchat@agmail.2 Demand for gold in Vietnam In Vietnam, gold has become a main traditional asset for the accumulation of wealth for a long time. According to World Gold Council (2015), Vietnam is one of largest gold consumption countries with high growth rate in gold demand. Figure 5: Gold demand in selected countries Source: World Gold Counsil The Vietnamese culture, like other Asian countries, is a reason for high demand in gold consumption.
Gold is a metal that has great significant role in such cultures, especially in the ancient communities. People with high position (high income level) in society tend to use more gold (and golden color) as they consider gold is a status of power and wealth. In some LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 14 important events, such as wedding or start-up a business, gold jewelry is an indispensable item in these days. Figure 6: Vietnam gold demand period 2000-2015 Source: Thomson Reuters In Vietnam, such as a huge demand for this special kind of good make gold become one of the priority choice to reserve wealth for a long time.
Gold is a popular good in society, even that every market in Vietnam have at least one gold jewelry store. Trading gold and foreign currencies are tightly controlled because of stability of these kind of assets have very important role in Vietnam economy. In Vietnam, citizens have to legally purchase gold bars at some licensed institutions (Nhu & Trang, 2014) LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 15 Vietnam need capital for economic development, but many of capital are in the form of gold in households, estimating there are 400 to 1000 tones of gold kept in houses of Vietnamese families (Thuy, 2013). The people use gold as hedging instrument against high inflation environment, which could cause impairment on their wealth.
The demand for gold in Vietnam make the economy have trouble because the gold import contribute to the deficit trade balance through recent years.2 Problem statement Based on aforementioned information, it is clear that gold market play a very important role in Vietnam economic situation. Gold is an attractive object in three types of group: the government, the banks and the investors. The government want to increase capital for economic development, which currently stay in form of gold in households. The banks want to raise deposit fund through gold-related financial service from Vietnamese households.
The investors want to investigate the reasons behind gold price volatility in Vietnam. There are many studies about gold market in Vietnam, but most of them pay attention on empirical research on gold prices and macro-related issues (Hoang, 2004; Hau et al, 2013; Sy, 2011; Lai, 2011). Until now, there are not any micro-related studies about investment behaviors of Vietnamese households toward gold. Although there are also some researches that have been conducted in other countries (Maheran et al 2008; Lutter, 2008; Hundal et al, 2013), however, cultural difference may not be applicable for different country context.
This study will fill in LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 16 this gap in terms of understanding factors affecting intention invest in gold of Vietnamese households. Objectives and Aims Based on above problem statement, this study aims at following objectives: (1) To find out the investment behaviors toward gold of Vietnamese people. (2) To explore what factors affecting intention to invest in gold in Vietnam. Research scope The scope of this study is limited in Ho Chi Minh City (HCMC) area, the economic center of Vietnam.
HCMC has two advantages for this study: firstly, the demographic structure of this city is diverse, means that the city has most of people from all over the countries; secondly, gold market in HCMC is very active and easy to access huge number of licensed institutions. This study is conducted by questionnaire survey method to explore in-dept understanding of factors affecting decision to invest in gold of individuals. Significance of research Based on the author’s knowledge, this research is first attempt to explore the investment behaviors toward gold in Vietnam. Gold play an important role in global financial system, as their demand have high association with the global economic growth.
However, their future LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 17 prospect is depend on the fundamental needs of people around the world. The understanding about motivation behind gold demands of people in developing countries like Vietnam could help to forecast the long-term demand of the gold. For Vietnam, this research have a significant role in policy making process to regulate the gold market. The large import from gold deteriorate the trade balance in Vietnam and put pressure on exchange rate management.
Understanding what makes Vietnamese love gold is thus very important to control the gold market and its impact on economy.