UPDATE 1-Vietnam to loosen share trade band as markets recover

(Recasts to add market close, fuel price cut, details)

HANOI, Aug 18 (Reuters) - Vietnam said on Thursday it will widen daily trading bands on its stock exchanges from next week, amid signs that one of the world's worst-performing markets this year may be stabilising.

The State Securities Commission, the market watchdog, said the daily trading band on Ho Chi Minh Stock Exchange .VNI will be widened to plus or minus 5 percent for shares and fund units from next Monday, from +/-3 percent now.

On the same day the band on the over-the-counter Hanoi Securities Trading Center .HASTCI will also widen to +/- 7 percent from +/- 4 percent now, it said in a statement.

The changes to the trading bands will be in place based on market performance, the commission said, without elaborating.

The VN Index on the Ho Chi Minh City exchange closed up 2.69 percent on Thursday at 476.50 points. The market has gained every session since July 28 but has still lost nearly 50 percent so far this year, after rising 23 percent in 2007.

In Hanoi, the index edged up 2.76 percent to end at 146.57 points, but it is still 55 percent lower than the end of last year.

"The market could have another strong advance today, mainly supported by the government's decision to cut retail petrol prices," said Nguyen Phu Dung, an investment analyst at APEC Securities Co.

"Investors showed their confidence in a longer and sustainable recovery of the market," he said.

Despite strong growth of more than 6 percent, the Communist Party government is facing its biggest economic test since market liberalisation began in earnest in the mid-1990s, with inflation in double digits every month since last November and a tripling of the trade deficit.

Vietnam, which is almost entirely reliant on oil product imports because it lacks major refineries, slashed retail petrol prices by up to 5.3 percent from Thursday, officials said [ID:nHAN166425].

In a longer term, the Vietnamese government has raised its economic growth forecast for next year to between 7 percent and 8 percent and aims to bring inflation back to single digits [ID:nHAN40297]. (Reporting by Ho Binh Minh; Editing by Kim Coghill)