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


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



2.2.3. Perceived insecurity ..................................................................................................... 25
2.2.4. Convenience to invest .................................................................................................. 27
Chapter 3: Method and Data ..................................................................................................... 29
3.1. Theorical model.................................................................................................................. 29
3.2. Hypothesis .......................................................................................................................... 29
3.3. Qualitative research ............................................................................................................ 30
3.3. Measurement ...................................................................................................................... 31
3.4. Sample ................................................................................................................................ 35
3.5. Data Analysis steps ............................................................................................................ 35
Chapter 4: Data Analysis and Results ...................................................................................... 36


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4.1. Descriptive statistics ........................................................................................................... 36
4.2. Data reliability test with Cronbach’s Alpha ....................................................................... 38
4.3. Exploratory Factor Analysis (EFA) ................................................................................... 41
4.4. Regression analysis ............................................................................................................ 44
4.5. Discussion of findings ........................................................................................................ 47
Chapter 5: Conclusion ................................................................................................................ 50
5.1. Conclusion.......................................................................................................................... 50
5.2. Implications ........................................................................................................................ 52
5.3. Research limitation ............................................................................................................. 53
References .................................................................................................................................... 54
Appendices ................................................................................................................................... 60
Appendix A: Questionnaire....................................................................................................... 60
Appendix B: Codified variables ................................................................................................ 63
Appendix C: EFA results of independent and dependent variables .......................................... 66
Appendix D: Regression results ................................................................................................ 72




Truong Trung Tai


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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.


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Chapter 1: Introduction

1.1 Background

1.1.1 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.


Figure 2: World gold demand in period 2000-2015
Source: Thomson Reuters

Figure 3: World gold price period 1970-2015
Source: Thomson Reuters


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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

role in Vietnam economy. In Vietnam, citizens have to legally purchase gold bars at some
licensed institutions (Nhu & Trang, 2014)


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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.

1.2 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


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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.

1.6. Thesis structure

This paper is organized as follow:
Chapter 1: this chapter present the history of gold demand in the world and in Vietnam
market, as well as discusses about the problem faced by Vietnam government about gold
demand.
Chapter 2: this chapter present the theoretical perspectives of the research, context and the
factors that matters.
Chapter 3: this chapter present the research method, the way of setting up the measures
and conducting the survey. This part includes:

qualitative and quantitative approach to the

research.
Chapter 4: this chapter designed to present the results of research and discuss the main
finding


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Chapter 5: this chapter is for conclusion and some issues related to this research.


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greater risk of loss is huge. Based on the information the positive direction in the market,
investors buy and will promptly proceed to sell when prices are rising and achieve desired
profitability analysis without the capacity to increase profits. Because they believe that the
current asset price fully reflects the expected information.
The “adverse risk theory” suggest synonym of this behavior. Asymmetric nature of the
psychology of investors between the values they expect to profit and loss, is the risk adverse
phenomenon. Empirical evidence has shown that people weigh “loss pain” is many times more
than the “profit gain”. Such as investors tend to maintain the loss position in the hope that
prices will eventually rebound. The adverse risk theory can explain the behavior of investors
holding asset for long time while price go down.
“Mental accounting theory” provide a interesting explanation for the topic. Investors tend
to split the decisions on the "virtual accounts" in the brain instead of combining them into a
unified whole, and generally handle these decisions independently, so do not pay attention to
the correlation of these accounts. And then, they make a great decision looked reasonable, but
in fact is wrong because in reality events tend to be correlated with each others.


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Some psychological test have shown that people generally believe that they better than
others, this often exaggerated their understanding. Overconfident state increase the investment
activity because it makes investors ready for their views that ignore the further reference from
other investors. Overconfident investors are always perceived their actions less risky than other
investors feel. Sometimes these overconfident investors misinterpret the value of information
they receive, not the authenticity but also the sense of wrong information.
The “conservative theory” also suggest the familiar explanation about investing process.
When economic conditions change people tend to react slowly to changes, they tied their mind
to the general situation in a earlier period. That means when they believe the economy decline,
they said that this is only temporary, long-term economy is still going up, but they can not see
the signals for a cyclical downturn has started. And after a period of time, they has not yet


2.2.1. Economic benefits of investing
The tension of relationship between home country and other countries is also a motivation
factor for investor to choose gold as safe asset because of its global acceptance. Recently, the


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disputes in East Sea (globally called “China South Sea”) between Vietnam and China have
cause some volatility in gold market. The State Bank have to officially stabilize the market
sentiment. (Son, 2014).
In Vietnam, news about gold appear repeatedly in daily newspapers, this will motivate
many small investors conducting speculation on gold (Phu, 2010). This media factor is
effective in enhancing the awareness of potential investor to the product or services. (Karrh et
al, 2003).

Some investors are not aware of the investment alternative due to lack of

information in the media channels.
People choose gold investment as diversification instrument to reduce the risk of entire
porfolio, its correlation with other type of assets is low. (Baur and Lucey, 2010). In Vietnam,
there are often four channels for individuals to invest their money: real estate, gold, stock, and
saving deposits (Vy, 2014). Therefore, gold could be seen as investment vehicle for diversifing
porfolio reason.
High long-term return is one of attractive features when investing in gold. Gold is an
unrenewed commodity, lasting forever and often kept in chest rather than floating in
circulation, hence the supply of gold is not sufficient for gold demand with increasing
population in the future. Like other assets in global market, gold price in short term often
obtain high volatility, but in longer term, at least 6 months horizon investing in gold getting
favoured return than other asset. (Ronapat, 2007).

(World Gold Council, 2014).
Foreign investment boost economic performance of the country, so it will stabilize the
gold price because it strengthen the belief in economic development. Foreign investment also
impact gold price through exchange rate channel because the more investment the more foreign
currency that a country accumulate.
Money supply changes make impact on inflation and exchange rate so it has relationship
with gold price. People often have negative reponse when government increase the money
supply in economy because it’s a signal of uneffective monetary policy, and this result in a
series of unfavored consequences.
2.2.3. Perceived insecurity
In the gold market, there is a traditional wisdom “the rising insecurity is good for gold”.
But the concept of insecurity is difficult to make clear in simple term, as well as the term
security. According to Friedewald et al (2014) there are 7 perspectives of security when people
facing:
 Physical security deals with someone feeling about safety of physical
characteristics of themselves or the system, place or property.