Vietnam stocks rise 2.7 pct, first gain in a week

HANOI Oct 29 (Reuters) - Vietnam's main stock index closed up on Wednesday for the first time in a week as rallies on global markets prompted buying by domestic investors.

The Ho Chi Minh Stock Exchange .VNI, the world's worst performer this year, ended up 2.73 percent at 331.62 but it has fallen 64 percent so far this year. It hit a record high of 1,170.67 in March 2007.

Analysts said shares rallied after gains on U.S. markets on expectation the Federal Reserve would cut interest rates further.

But they said trading volume remained thin, making it difficult to forecast a sustainable recovery.

Foreign investors were still selling blue chips heavily, traders said. On Wednesday they were net sellers of 130 billion dong ($8 million) of shares, or 18 percent of the daily trading value, exchange data showed.

Managing Director Le Chi Phuc of VNDirect Securities said the weak buying demand of small investors could not offset heavy selling by foreign investors.

Market regulators have tried to convince the public that foreign investors were selling up but holding cash for future investment in Vietnamese shares.

However, bankers said dollar demand was rising partly because foreign investors were repatriating funds. ($1=16,514 dong) (Reporting by Pham Hong Hanh; Editing by Alan Raybould)