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The securities trading floor in downtown Hanoi is packed, as has become usual in the past few months, but there are a lot of worried faces in the crowd now.

Red downward arrows dominate the digital share-price board at the exchange as Vietnam's stock market continues its recent slump, hitting 472.86 on Friday.

The index has dropped sharply since hitting a record high of 632.69 on April 25. Analysts call the slump a predictable correction following the meteoric rise of Vietnam's six-year-old stock market in 2006 - the index was as low as only 304.23 in January.

'Big fluctuations like this are totally par for the course with an immature market,' said Peter Ryder of the Indochina Capital Corporation in Hanoi. 'But the potential is still very strong.'

A combination of factors are commonly cited for this year's flurry of activity in the communist-run country's young stock market, which despite recent growth still features just 42 listed companies.

Vietnam's ongoing programme of free-market reforms, a large, young labour force, and impending accession to the World Trade Organisation are collectively catching an unprecedented degree of foreign attention.

Still one of the least-developed countries in the region, Vietnam is now being widely touted as Asia's new hot target for all types of foreign investment. Regarding the stock market, a highly bullish Merrill Lynch report in March began by saying, 'Buy Vietnamese equity now - for your fund, yourself or your children.'

Meantime, the maximum proportion of shares foreigners are permitted to hold in Vietnamese companies was recently increased from 30 to 49 per cent. The supply of listed firms has grown closer to investor demand - this month one of the country's largest domestic banks, Sacombank, became the first bank to list on the exchange. Other large Vietnamese companies have followed suit. And there's a much greater degree of private ownership in Vietnam's listed firms than in China.

'I think it's a very positive dynamic,' Mr Ryder said.

Foreign investment, though, is only part of what analysts call the 'frenzy' in the Vietnamese stock market in 2006. Ordinary Vietnamese are increasingly getting into the act.

One of the thousands of new stock-market enthusiasts is Pham Duc Toan, a tour guide in Hanoi.

Mr Toan said he has lost a bundle as the market has plunged in the past few weeks. He said he only began investing in stocks three months ago, having heard the buzz about the rising market from friends.

But he won't let the recent bad run turn him away, he said.

'At first I just bought into companies according to my friends' advice,' Mr Toan said. 'But now I have a bit of experience, so I am going to be more careful.'

Vietnamese disposable incomes are growing in synch with the country's steady GDP growth of more than 7 per cent. But traditional safe-haven investments like gold and property are losing their appeal to investors.

Coupled with the foreign-fuelled buzz around the stock market, there's been a surge of interest in recent months, packing the once-ignored trading floors. Analysts say the boom may be responsible for pushing the market to the over-valuation point in recent weeks.

Such wild fluctuations are seen as inevitable in part because of the lack of professional advice on stock markets and investment strategies available to the general public. The Hanoi exchange in particular is a novelty for the locals, having opened only last year. The first exchange opened in Ho Chi Minh City (formerly Saigon), the country's biggest city and business hub, in 2000.

Don Lam, managing partner of the VinaCapital Group in Ho Chi Minh City, said many of the newcomers still see investing in the stock market more as a form of recreational gambling than a serious investment option.

Vietnamese use the word choi, commonly translated as 'play,' to describe their buying and selling of shares. And many have borrowed money to get involved.

'Currently the market resembles a casino, but that will change over time as investors learn to make more sophisticated decisions,' Mr Lam said.

The local investors are full of questions for visiting foreigners about stock exchanges. The old adage of 'buy low, sell high' gets the kind of boisterous response only possible from those who haven't heard it before. Meantime, despite the recent slump, Vietnam's new capitalists continue to urge each other to get involved.

'What they lack in experience, they more than make up for in enthusiasm,' Mr Lam said.



Worried looks replace market frenzy