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Dong stronger as government may support stocks   2008-06-24 -

The dong rose Monday on speculation that the government would take steps to support the nation’s equities during slumps.

A Vietinbank employee with VND100,000 notes and US$100 notes  



The local currency’s interbank rate extended gains from last week after the Dau Tu Chung Khoan newspaper reported that the State Securities Commission of Vietnam, the nation’s market regulator, was drawing up plans to establish a fund to stabilize the stock market, citing Chairman Vu Bang.

The planned government fund would buy stocks when the market slumps and sell shares on gains, said the report.

The dong strengthened as much as 0.1 percent to VND16,602.5 against the dollar Monday before trading at 16,614 as of 4:19 p.m. in Hanoi, according to data compiled by Bloomberg.

The State Bank of Vietnam set the interbank exchange rate at VND16,450 per dollar Monday, compared with VND16,452 last Friday, according to its website.

Traders are allowed to buy and sell the currency at prices of up to 1 percent on either side of that rate.

The Ho Chi Minh Stock Exchange’s VN-Index was the only winner in Asia Monday, rising 0.8 percent.

“Sentiment has improved as stocks rose on news of the government’s plans to support the market,” said Bui Thi Kim Oanh, a fund manager at Finasa in Hanoi.

The market regulator increased the share trading band to 3 percent last week, a one percent hike, in an attempt to boost trade.

Stock purchases

Foreign investors bought US$6.9 million more stocks than they sold Monday.

Last week, they bought a net $12 million in local equities, taking their net purchases this year to $346 million.

Despite a few recent gains, Vietnam’s benchmark stock index is still the world’s worst performer so far this year.

The index has crumbled 62 percent in 2008 as inflation grew more rapidly than it had in 16 years last May.

May’s consumer price index was 25.2 percent, driven by record rice and energy prices.

June inflation data are due this week.

“In the short term we are due for some good news as inflation data this week should improve,” said Richard Yetsenga, a currency strategist at HSBC Holdings Plc in Hong Kong.

“The medium-term picture is still unresolved.”

Local bond values dropped on concern that inflation would spur the central bank to raise its interest rate, which is already high at 14 percent per year.

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