Vietnam's Stocks Round Out Monthly Gain, World's Best Performer

By Nguyen Kieu Giang and Van Nguyen

Aug. 29 (Bloomberg) -- Vietnam's benchmark stock index rounded out the largest monthly gain of global markets on speculation the fastest inflation in Asia may be under control.

The VN Index gained 19.4 percent this month, the biggest monthly gain since January 2007, according to Bloomberg data. Improved liquidity following a range of government market- boosting measures and signs inflation may peak in September has helped the index this month.

``Three key areas of inflation, the trade deficit, and foreign currency that have all been stabilized and improved have added a lot to positive sentiment,'' said Don Lam, chief executive officer of Vinacapital Investment Management Ltd. in Ho Chi Minh City.

The measure today fell 8.59, or 1.6 percent, to close at 539.10, after the central bank kept interest rates unchanged. Some investors had speculated the bank would cut rates. Among the 156 index members, 60 rose, while 83 declined.

The central bank today said it would maintain the key rate at 14 percent, the highest in Asia. The bank was under pressure from companies to lower rates, making it cheaper to borrow money.

Consumer prices this month rose 1.6 percent, slower than the 2 percent to 3 percent expected by analysts, according to Bui Duc Thinh, Hanoi-based head of the research department at Royal International Securities.

The trade deficit also widened at a slower pace through August, allaying fears Vietnam may be facing a currency crisis, Standard Chartered Plc said earlier this month.

Gasoline, Trading Limits

Saigon Thuong Tin Commercial Joint-Stock Bank, known as Sacombank and the only lender on the Ho Chi Minh City Stock Exchange, dropped 1,600 dong, or almost 5 percent, to 30,900, the lowest since Aug. 22.

Vietnam Dairy Products Joint-Stock Co., known as Vinamilk and the second-biggest company on the bourse, lost 5,000 dong, or 4.5 percent, to 106,000. Sacombank and Vinamilk posted the biggest declines today.

Refrigeration Electrical Engineering Joint-Stock Co., a maker of air conditioners and electrical appliances, advanced 2,200 dong, or 5 percent, to close at 46,500, extending a winning streak of 16 days after reporting pretax profit of 28 billion dong ($1.7 million) in July.

Vietnam lowered gasoline prices on Aug. 27 for a second time this month after crude oil declined. The benchmark index has gained 13 percent since the first reduction in fuel prices on Aug. 14, Bloomberg data shows.

The government also allowed Vietnam's two exchanges to widen their daily trading limits from Aug. 18. Gains or losses on the main Ho Chi Minh City Stock Exchange were raised to 5 percent from 3 percent, while the cap on the smaller Hanoi Securities Trading Center was lifted to 7 percent from 4 percent.

This increase helped ``push up liquidity,'' contributing to ``boosting trading volume'' in the market, said Thinh at RIS.

Increased liquidity helped the stock market rally this month after retail investors, the main drivers of Vietnam's stock market, pulled money from their investments in gold and U.S. dollars, according to Vinacapital's Lam.

To contact the reporter on this story: Nguyen Kieu Giang in Hanoi at giang1@bloomberg.netVan Nguyen in Ho Chi Minh City at vnguyen23@bloomberg.net