No respite seen for ravaged Vietnamese stocks

By Grant McCool

HANOI, June 4 (Reuters) - Vietnam's stock market, the world's worst performer so far this year, fell to fresh 2-year lows on Wednesday as investors grappled with double-digit inflation and a liquidity crunch.

Adding to the concerns, the stock exchange said many listed firms had not established provisional funds to cover losses, in a market that has plunged 57 percent this year. "We think we are close to the point that the government will take action," said Kevin Snowball, director of PXP Vietnam Asset Management in Ho Chi Minh City.

"A plan is needed to restore investor confidence because there is absolutely no confidence now."

Soaring inflation, a widening trade deficit and banking woes are straining the developing Southeast Asian country, where macroeconomic stability has been taken for granted as it boasted one of the world's highest growth rates since 2000.

The Vietnam index .VNI ended 1.4 percent weaker at 395.7 on Wednesday, falling below 400 points for the first time since August 2, 2006 when it had only a few dozen listings compared with more than 150 currently.

Shares are in their fourth consecutive week of declines, and losses might have been even deeper if securities regulators had not imposed a daily trading band of +/- 2 percent in April to try to stabilise the market.

All three major credit rating agencies have downgraded their outlooks on Vietnam's key ratings to negative in recent weeks as the government struggles to curb inflation.

"The economic imbalances now emerging are greater than anticipated, thereby derailing the improving trend previously evident in the country's credit fundamentals," Tom Byrne, a Moody's Senior Vice President, said in a statement on Wednesday after it lowered the country's rating outlook, following similar moves by rating agencies Fitch and Standard & Poor's last month.