UPDATE 2-Vietnam plans package to boost stock market

(Recasts to add details, analyst comments)

By Ho Binh Minh

HANOI, Jan 30 (Reuters) - Vietnam will ease restrictions on bank loans to local stock market investors and allow foreigners to use dollars to buy Vietnamese shares, the central bank and state media said, in a move aimed at boosting the young market.

The Ho Chi Minh Stock Exchange .VNI closed up 3.9 percent at 843.10 points on the news, viewed by analysts as positive for stock market investments in the Communist-run Southeast Asian country which is seeking to develop its capital markets.

"This will definitely be positive for the stock market," Prakriti Sofat, Asian Economics analyst at HSBC in Singapore said. "There is a lot of foreign money waiting on the sidelines."

Vietnam would allow offshore investors to use foreign currencies to pay for shares at auctions by Vietnamese firms instead of the domestic dong currency, Finance Minister Vu Van Ninh was quoted by the official Vietnam News Agency as saying.

The central bank also said it would impose a new cap of 15 percent to 20 percent of registered capital plans to limit bank loans to local stock investors, a change from previous rules requiring banks to keep lending for securities investment at 3 percent of outstanding loans.

Banks with a capital adequacy ratio of at least 8 percent and bad debts of less than 5 percent would qualify, the Vietnam Economic Times newspaper quoted Deputy Governor Nguyen Dong Tien as saying.

Market regulators have said they want to raise Vietnam's stock market value to between 50 percent and 60 percent of gross domestic product this year from 43.4 percent in 2007. GDP grew 8.5 percent to $71 billion last year.

STIMULUS

At its lows last Friday, the Vietnam Index had dropped almost 20 percent so far this year and was down a third from its March 2007 peak but it has recovered some of those losses in the past few days and is now down 10 percent year-to-date.

"The government seems to be taking responsibility for keeping the stock market buoyant while governments in most countries don't do that, at least not so explicitly," said Adam McCarty, chief economist of Mekong Economics consultancy in Hanoi.

The new lending cap and payment facility would stimulate stock investment but it would take time to gauge the risk at banks.

"They have turned around and allowed the banks to take more risk, but how much more risk they can take is hard to tell," McCarty said.

The central bank would apply further measures to control lending in securities investment to ensure the safety for commercial banks, it said in a statement. The measures would be in line with both domestic markets and international practice, the State Bank of Vietnam said.

The new lending cap would mean different things to banks depending on their total loans and registered capital level.

Banks which increased their registered capital significantly last year while their loans did not pick up could lend more in line with the new cap, while larger banks with high but stable capital may have to cut the loans, brokers said.

Southeast Asia Bank with a registered capital of 3 trillion dong ($186 million) could nearly double loans for securities investment to 600 million dong, instead of 330 million dong or 3 percent of its outstanding loans of 11.04 trillion dong, according to Reuters calculations.

But Asia Commercial Bank ACB.HN, Vietnam's fifth largest lender, may have to cut the loans to 526 million dong or 20 percent of its registered capital of 2.63 trillion dong, from 948 million dong or 3 percent of its loans at the end of 2007. (Additional reporting by Grant McCool and Nguyen Nhat Lam; Editing by Lincoln Feast) ($1=16,095 dong)