Testimony by top financial policymakers before the National Assembly Standing Committee last Thursday that the Government intended to take tightening measures aimed at curbing inflation sent shares plunging on both Viet Nam's stock exchanges.

Minister of Finance Vu Van Ninh outlined fiscal austerity measures, while State Bank of Viet Nam Governor Nguyen Van Giau said that credit growth at commercial banks would be reined in from a target of 23 per cent to less than 20 per cent in a bid to tighten up on liquidity.

The central bank's recent move to devalue the domestic currency by 9.3 per cent, while aiming at cutting into the trade deficit and narrowing the chasm between official and black market exchange rates, has been widely criticised as an inflationary move, while its effectiveness on reducing the trade deficit remains unknown.

Meanwhile, the price of a US dollar on the street continues to soar. On Saturday, the black market rate shot to VND22,400 per dollar, much higher than the official rate of VND20,885.

In another sign of shaken confidence in the domestic currency, local gold prices also surged to VND38.5 million (US$1,719) per tael. (One tael is equivalent to 1.2oz).

On the HCM City Stock Exchange on Friday, the VN-Index finished out the week at 503.92 points, down 3 per cent from the previous Friday's close. Blue chips tumbled across the board, with bank and securities shares taking the biggest hit.

Telecom Ngo Han (NHW) was the biggest gainer over the course of the week, picking over 20 per cent in value, while Sacombank Securities Co (SBS) was the biggest loser, plunging 19.7 per cent.

On the Ha Noi Stock Exchange, the HNX-Index concluded the week at 102.31, a modest gain of 0.17 per cent over the previous week's close. Trading value rose nearly 15 per cent to VND439.6 billion ($20.9 million), with over 25 million shares traded.

Hai Phong Electric Pump Assembly (DNC) was the biggest advancer on the Ha Noi market last week with a rise of nearly 17 per cent in value, while Chi Linh Building Materials and House Development (MCL) was the biggest decliner, dropping 23.5 per cent.

Foreign investors last week bought a net of VND9 billion ($428,600) worth of shares on both exchanges, although they were net sellers for three out of five sessions. Recent net-sell sessions have raised concerns over a possibility of their gradual withdrawal from the Vietnamese market, a phenomenon seen on other emerging markets.

According to exchange statistics, however, net sales by foreign investors were mainly due to reduced buying activity rather than increased sales. In the five sessions from February 10-16, foreigners bought 40 per cent less than their per-session average in 2010, while average net sales value held steady at 2010 levels.

Cash outflow from emerging markets in China, Brazil and India had had a psychological effect on the Vietnamese market, said the director of analysis for Viet Capital Securities Co, Marc Djandji.

Meanwhile, Fiachra Mac Cana, head of analysis for HCM City Securities Co, blamed last week's devaluation of the domestic currency, suggesting that foreign investors took it as a sign to cut some losses.

February inflation data was expected this week and, if inflation for the month surpassed 2 per cent, it would put heavy pressure on the market, said Nguyen Quang Minh, an analyst with a Ha Noi-based securities company.

The Prime Minister was expected to approve proposals to increase electricity rates next month by an average of nearly 15.3 per cent over last year's rates, and Minh suggested this could fuel additional inflation fears among investors in the coming week.