Investors made a tentative return to the nation's stock markets last week, with indices on both the HCM City and Ha Noi markets making modest cumulative gains on the week.

On the HCM City Stock Exchange, the VN-Index closed last Friday at 452.63 points, a gain of 1.67 per cent over the previous week's close.

On Monday and Tuesday, the market saw an increased flow of capital into penny stocks, while active put-through trading last Thursday and Friday was attributed to a few foreign institutional investors.

Tran Quang Vinh, a market analyst with a Ha Noi-based securities firm, said that depressed stocks prices had finally encouraged a capital infusion into equities across the board.

"These inflows were backed by some bits of news, including the State Bank's ban on commercial banks from lending cash against gold deposits, its decision to keep the prime rate unchaged at 8 per cent, and its indication that it would inject more US dollars into commercial banks," Vinh said.

As a result, the average value of trades per session increased 2.89 per cent over the previous week to VND738.2 billion (US$37.8 million), on an average volume of about 29 million shares.

On the Ha Noi Stock Exchange, the HNX-Index also managed to bounce back by 1.38 per cent from the previous Friday's close to 112.86 points, despite declines in both volume and value.

Average daily volume fell 12 per cent from the previous week to 22.3 million shares, worth an average of just VND443.6 billion ($22.7 million).

Blue chips were most heavily favoured, with PetroVietnam Construction (PVX) leading the market by value with transactions totalling VND348.6 million ($17.9 million).

Foreign investors helped sustain both markets, picking up a net of VND286 billion ($14.7 million) worth of shares on the HCM City market and VND10 billion ($512,000) in Ha Noi.

At its annual investor conference, VinaCapital said that number of participants in the market this year had doubled over last year, a factor expected to help renew interest in the Vietnamese market among overseas investors.

Analysts with the HCM City Securities Co suggested investors keep a close eye on the foreign exchange markets over the next few days as the State Bank of Viet Nam would no doubt like to see black market rates fall back below VND20,000.

The central bank was also determined to reduce and eventually eliminate the usage of both gold and US dollar as alternative currencies in the economy, they said, and measures such as last week's restriction on lending against gold collateral should help shift investment back toward the securities markets.

Meanwhile, efforts to restore confidence in the Vietnamese dong through reductions in money supply and credit growth to levels more consistent with nominal growth in GDP should be expected, they said.