Many investors have dumped shares this week as news of a power price hike starting March triggered inflation worries.
In addition, the slower credit growth target could restrict lending for investment in the stock market, experts say.
The Ho Chi Minh Stock Exchange's VN-Index, the country's major index, slid 4.02 percent, the most since November 26, 2009, to 483.68 on February 21, with 253 out of 280 stocks losing ground. The gauge has lost 10 percent since the market reopened after the Tet holiday.
The government has decided to raise electricity prices by a record 15.3 percent this March and fuel prices increased on Thursday as well.
Fiachra MacCana, head of research at Ho Chi Minh City Securities Corporation, said in a statement on Monday that a petrol price hike would "surely push the March CPI close to or even above 2 percent month-onmonth."
Nguyen Ngoc Truong Chinh, general director of Golden Lotus Securities Company, said the stock market has been hit hard by the news of a cut in this year's credit growth goal.
"The information released on the morning of February 21 that the governor of the State Bank had won approval from the government to slash the credit growth target to below 20 percent [18-19 percent from 23 percent] has knocked investors out," Chinh said.
"This is very "˜sensitive' news to stock market players, prompting them to sell off shares," he said.
The cut in the credit growth goal followed an increase in the refinancing rate on February 18 to 11 percent from 9 percent. Both policies showed the government is tightening monetary policies to contain inflation.
Some investors said the policies reminded them of the gloomy days of the stock market in 2008 when the government also tightened monetary policies by raising interest rates, making it difficult for them to access bank loans.
Economist Le Dat Chi of the Ho Chi Minh City Economics University said with the current credit growth target and high interest rates, not only stock market players but also listed companies will find it hard to access bank loans.
"Even if firms can access loans, high borrowing costs will affect their profits," Chi said.
Hoang Thach Lan, a Ho Chi Minh City-based analyst who heads the brokerage unit at the Mekong Housing Bank's MHB Securities Co., said listed businesses will have to suffer more costs in the coming months.
The hike in refinancing rates, electricity prices, and an increase in fuel prices will all add more costs to companies and affect their production, Bloomberg quoted Lan as saying.
Meanwhile, economist Dinh The Hien recommended that investors not panic but closely follow the market's movements.
"I expect dollar prices will not increase more than 10 percent from now until the end of this year. Gold prices are unstable. So, besides depositing money in banks, investors should research stocks carefully [to choose good ones]. The current low prices are offering good opportunities for calm investors to buy shares," he said.