Recent Rise in Vietnam Stock Market Signals Downturn for Sugar

If you are considering investing in the sugar index of the Vietnamese stock market, you should probably maintain a pessimistic attitude towards the market as a whole. A new report from VNDirect Securities Company has highlighted a startling trend in stock performance: as the economy as a whole becomes stronger, the price of sugar goes down. Experts attribute this trend to a culture that is becoming more educated about health in general as well as an economic component of improved options that are more expensive but also more readily available when the economy of Vietnam is doing well.

Understanding the Vietnamese economy

In order to understand the economic situation behind sugar’s steady decline, it’s useful to take a look at the major VN index that tracks the performance of the Vietnamese economy. Stock indexes are measurements of specific segments of the stock market of an individual country. They may be very generic (the S&P 500 measures the 500 top-performing corporations in the United States) or very specific (the NASDAQ tracks only stocks related to the internet and technology). Generic indexes are key performance indicators when it comes to the overall health of an economy, while specialized indexes only look at how one segment of the market is doing.

Vietnam’s benchmark index is the Vietnam Ho Chi Minh Stock Index (VN Index) is the strongest general index in the nation of Vietnam. Between December of 2017 and January of 2018, the VN Index put up a record “1,170 points,” with growth in a wide variety of sectors ranging from banking and financial services to hospitality and tourism.1

Sugar–a not-so-sweet gamble in Vietnam

Unfortunately for sugar producers, this growth in the Vietnamese economy as a whole extends to almost every industry except the sweet stuff. VNDirect Securities Company found that, after tracking the performance of the four major producers of sugar in Vietnam via index, investment in sugar is a risky gamble when the economy is strong. During the same time period in which the VN Index rose to record-breaking levels, the price of sugar “fell from 15 US cents a pound…to 12 US cents a pound.” 1 Sugar as a whole declined about 17.6 percent on the global market in a year, but individual sugar manufacturers in Vietnam were hit much harder. The biggest losses came from Kon Tum Sugar JSC, whose stock saw a whopping “39.2 percent” decline in value. 1

What’s the deal with sugar’s stuttering?

Experts hypothesize that the decline in the price of sugar within the Vietnamese economy is a direct result of a stronger global economy and a public that is becoming increasingly informed about the positive health consequences of cutting sugar and carbs from their diets. As low-carb and low-sugar diets become popular worldwide thanks, at least in part, to the influence of Hollywood, consumers around the globe are lowering the demand for sugar. Additionally, when the global economy is strong, consumers in all countries will naturally gravitate towards more health-conscious choices thanks to an increase in capital. As demand for low-sugar options increases, the outlook for Vietnam’s sugar industry looks bleak.