Dong Drops to Record Low, Stocks Slump After Currency Devalued

Lên trang nhất Bloomberg.http://www.bloomberg.com/apps/news?pid=20601087&sid=a_lPh1JSeKcE&pos=4
Nov. 26 (Bloomberg) -- Vietnam?Ts dong fell to a record low after the central bank devalued the currency to curb quickening inflation and a widening trade deficit. Stocks extended losses, heading for the worst week since March 2008.

The State Bank of Vietnam yesterday set the reference rate for today?Ts trading 5.2 percent lower at 17,961 against the dollar, after the difference between spot and black-market rates widened to the most in a decade. The dong has fallen 5.5 percent this year, set for a second annual decline.

?oThe central bank is trying to regain control of the foreign-exchange market by stepping up with an aggressive approach to stop the drift in the unofficial market rate,? said Fiachra MacCana, managing director and head of research at Ho Chi Minh City Securities Co.

The dong declined 3.4 percent to 18,495 against the dollar as of noon in Hanoi, according to data compiled by Bloomberg. It earlier traded as low as 18,500, 3 percent weaker than the reference rate. The central bank yesterday narrowed the daily trading band to 3 percent from 5 percent to limit moves.

The benchmark VN Index dropped 4.1 percent to close at 482.60, extending the week?Ts loss to 13.6 percent, which would be the biggest decline since the period ended March 21, 2008.

?oThe central bank?Ts policy in relation to the currency market also has a big impact on the stock market,? MacCana said.

Slowing Trading

The State Securities Commission of Vietnam ordered securities companies to restrict lending for stock investment, according to a statement on its Web site today.

?oThis will slow trading a bit but be fairer for investors, since previously only big investors could get this type of lending from brokerages,? said Nguyen Duc Hai, chief analyst at Vietcombank Securities Co. in Hanoi.

Vietnam yesterday increased the benchmark rate one percentage point to 8 percent, the first nation in Asia to raise borrowing costs this year. The Southeast Asian country is trying to sustain economic expansion in 2010, lower credit growth and meet economic targets, the central bank said yesterday.

?oThe State Bank of Vietnam wants to control inflation and the trade deficit, but by devaluing the dong, higher import prices will put pressure on inflation,? said Nguyen Van Hoang, chief investment officer at Saigon Asset Management in Ho Chi Minh City. ?oThey might not get what they expected.?