Vietnamese stocks advanced the most in Asia, with the benchmark index closing at the highest level in more than five weeks, after a drop in consumer prices in the two biggest cities signaled inflation may slow nationwide.
The Ho Chi Minh City Stock Exchange's VN Index jumped 1.6 percent to 500.18, the highest close since April 11. Vietnam Dairy Products Joint-Stock Co., the country's biggest listed company by market value, climbed 1.6 percent. Refrigeration Electrical Engineering Corp., known as REE, rose 5.2 percent as trading volume more than tripled from the 3-month daily average. The benchmark gauge's 50-day volatility, a measure of price swings, dropped to the lowest level in three months yesterday.
Consumer prices in Hanoi and Ho Chi Minh City in May dropped 0.2 percent and 0.16 percent respectively from the previous month, financial news website NDHMoney reported yesterday. The General Statistics Office is due to release its monthly consumer price index this week.
"Inflation keeps cooling in major cities, signaling a similar trend nationally," Tu Vu, associate director of research department at Viet Capital Securities Joint-Stock Co., wrote in a note to investors today. "Cooling inflation would provide room for the central bank to maintain easing policies to spur economic growth."
The State Bank of Vietnam cut policy interest rates earlier this month, the eighth reduction since the start of 2012, after inflation slowed to 6.61 percent in April. The central bank said May 10 that price growth will remain at 6.5 percent to 7 percent through 2013, compared with the 8 percent target the authority set in November.
Economic growth slowed to 4.89 percent in the first three months of this year, compared with 5.44 percent in the last quarter of 2012.
REE was the most-traded stock among the index's 306 companies today. The Ho Chi Minh City-based company's earnings will "easily" surpass its target this year, boosted by contributions from associated companies, Kien Nguyen, an analyst at Saigon Securities Inc., said by phone today.
Full-year net income may be 785 billion dong ($37.4 million), compared with the brokerage's previous forecast of 686 billion dong, Kien said. The company targeted profit of 650 billion dong this year, according to a company filing on the exchange's website on March 29.