Vietnam markets extend gains on government measures

HANOI, March 10 (Reuters) - Vietnam stocks opened more than 4 percent up and the dong rate hit a 16-month high on Monday, after the central bank widened the currency's trading band, its latest effort to tame inflation and restore investor confidence.

The Ho Chi Minh Stock Exchange .VNI extend Friday's gains to open 4.33 percent up at 667.88 points on Monday, rising for the third straight trading day. The main index stands 15 percent up from last week's 16-month low.

"The good news has been well received and now everyone is certain that the markets will at least regain what it has recently lost," a market analyst at Habubank Securities in Hanoi said.

"We expect to see some good performances this week," he added.

Still, the developing $17.8 billion exchange is 27 percent down this year after a series of central bank directives to dry up dong liquidity caused a sell off by local retail investors, who dominate the market.

The smaller, over-the-counter Hanoi Securities Trading Center .HASTCI also opened higher on Monday, up 6.84 percent at 240.98 points.

Last week the government investment arm, the State Capital Investment Corporation, said it had begun buying back shares on both markets, but it declined to identify shares purchased.

Domestic retail investors have bailed out in the past month following policy moves aimed at reducing inflation. The consumer price index rose in February by 15.7 percent from the same month last year. See FACTBOX of measures [ID:nHAN173054].

The State Bank of Vietnam has injected more money into the banking system and loosened its grip on the dollar/dong rate by widening the trading band to +/-1 percent from +/-0.75 percent to allow more flexibility for banks to absorb U.S. dollar funds from foreign investors.

The measure, announced on Friday, took effect on Monday and the central bank set the official dong rate at 16,025 per dollar, its highest in more than 16 months. [ID:nHAN146832].

The government also lifted the cap on foreign investor share ownership in unlisted non-bank companies to 40 percent from 30 percent as it moved to attract more investment [ID:nHAN92614]. (Reporting by Nguyen Nhat Lam and Ho Binh Minh; editing by Grant McCool and Neil Fullick)