Vietnam's benchmark stock index on January 19 rose the most in seven months and the currency rallied to a one-month high on speculation the central bank will cut interest rates and limit declines in the dong.
The Ho Chi Minh City Stock Exchange's VN Index climbed 3 percent to 373.43 at the 11 a.m. local-time close, the most since June 2 and capping a nine-day, 11 percent advance.
The dong gained 0.34 percent to 20,865 per dollar as of 1:24 p.m. in Hanoi, according to data compiled by Bloomberg, set for its biggest advance since Dec. 13. The central bank kept the currency's reference rate unchanged at 20,828, its website showed.
Vietnam will adjust policy interest rates to "more suitable" levels after the first quarter and limit declines in the dong to 3 percent this year, central bank Governor Nguyen Van Binh said on Jan. 11.
The dong dropped 7.4 percent versus the dollar in 2011, after annual drops averaging 6.4 percent in the previous three years.
"The signal from the central bank about lower interest and a more stable currency is making investors more optimistic," said Phan Dung Khanh, Ho Chi Minh City-based analyst at Kim Eng Securities Co. "It's still premature to say that investors' sentiment is totally recovered."
The stock index plunged 27 percent last year, the most among Asian benchmark gauges, as the government raised interest rates to cool inflation. The economy, a production hub for companies such as Intel Corp., grew 5.89 percent in 2011, down from 6.78 percent in 2010.
The State Bank of Vietnam cut its repurchase rate to 14 percent from 15 percent in July last year, while inflation slowed to 18.13 percent in December from 19.83 percent the previous month.
Inflation remains the fastest among 17 Asia- Pacific economies tracked by Bloomberg.
Bao Viet Holdings, the nation's biggest insurer, climbed 4.1 percent to VND50,500, the highest since Dec. 21. Masan Group Corp., which operates businesses from financial services to natural resources, rose 3.5 percent to VND103,000.
In the so-called black market, the dong traded at 20,950 and 21,000 per dollar at gold shops in Hanoi this morning, compared with 20,960 and 21,020 on January 18, according to a telephone information service, known as 1080, run by state-owned Vietnam Posts & Telecommunications.
The currency weakened to as low as 21,330 per dollar earlier this month, according to 1080.