Bruised Vietnam stock market extends small gain

HANOI, June 13 (Reuters) - Vietnam's share market .VNI, the world's worst performer this year, extended small gains for a second straight day on Friday after falling for six weeks in a row.

The Ho Chi Minh Stock Exchange ended 0.6 percent higher at 372.7 points, with smaller companies figuring among the gainers, while blue chip shares still fell.

The 8-year-old stock market has tumbled 60 percent this year after jumping 23 percent in 2007 on bright prospects for the emerging Southeast Asian economy.

"Both investors and speculators are paying attention to very cheap penny stocks and expect that blue-chip share prices may fall further," said Bui Ngoc Long, a director at International Royal Securities in Hanoi.

Shares in catfish exporter Navico ANV.HM rose 1.9 percent, but are still about 50 percent lower this year.

Higher prices of food and fuel and high credit growth in Vietnam have led to seven consecutive months of double-digit inflation, more than 25 percent in May.

Shares on the exchange trade daily within a narrow band of +/- 2 percent and fund managers have proposed a widening of the band or even removing it for a short period.

"People out there are realising that they do not need to throw the baby out with the bathwater," PXP Vietnam Asset Management director Kevin Snowball said of the two days of gains. "If the regulators widen the trading band and the timing is right, it does have a chance to go up."

Shares in the exchange's only listed bank, Sacombank STB.HM, extended a two-month slide to end down 1.9 percent. The shares have fallen about 50 percent over the past two months.

Ratings agencies have downgraded outlooks on the Vietnamese economy, also citing the fragility of the young banking system faced with a liquidity crunch.

On Wednesday, the central bank raised the base interest rate for the dong, which is used by commercial banks to calculate dong loans and deposit rates to 14 percent from 12 percent.

It was the third interest rate hike this year and the State Bank of Vietnam, the central bank, also lowered the dong by 2 percent against the dollar, a move that analysts described as an effective devaluation [ID: nSP288969].

Soaring imports have tripled the trade deficit to $14.4 billion so far this year, adding to the economic woes.

The over-the-counter Hanoi stock market .HASTCI gained 1.5 percent on Friday to close at 111.1 points, just a third of what it was at the end of last year. (Reporting by Nguyen Nhat Lam and Pham Hong Hanh; Editing by Grant McCool and Anshuman Daga)