UPDATE 1-Vietnam stocks drop again, spooked by arrest of executives

(Adds broker comments and context)

HANOI, April 26 (Reuters) - Vietnam stocks extended falls on Tuesday to hit the lowest levels since July last year, as traders cited concerns about U.S. monetary tightening, COVID-19 lockdowns in neighbouring China and the arrest of local executives in an anti-graft drive.

The country’s benchmark index fell as much as 3.6% in early trading on Tuesday to 1,263, the weakest level since July, before recovering slightly.

The index closed down nearly 5% on Monday. It has lost 13.8% so far this month, a slump investors and brokers partly attribute to recent arrests of business people for alleged market manipulation.

“Investors were shaken following the recent arrests of executives of local listed companies on accusations of market manipulation,” a Hanoi-based stock broker said.

Investor sentiment has also been hurt by concerns about inflation, expectations of quicker tightening in U.S. interest rates and the impact on supply chains of COVID-19 lockdowns in China, said two other brokers, who also declined to be named.

Vietnam has recently stepped up its anti-graft drive, with a new objective of cleaning up financial markets, and has made several arrests recently, including targeting business people and market regulators.

Vietnam’s market capitalisation rose 1.46% as of the end of March from a year earlier to 9,446 trillion dong ($411.23 billion), or 146% of gross domestic product, according to the State Securities Commission. ($1 = 22,970 dong) (Reporting by Khanh Vu; Editing by Martin Petty and Ed Davies)