Illustrative image (Photo: VNA)

Hanoi (VNA) - Shares dropped on both Vietnamese markets on the first trading day of 2016 after a sharp fall in Chinese stocks spooked local investors.

The benchmark VN Index on the HCM Stock Exchange fell 0.8 percent to close at 574.41 points while the HNX Index on the Hanoi Stock Exchange dropped 0.6 percent to end at 79.45 points, ending a three-day rally of 2.7 percent.

Investors in the Vietnam's stock markets were alarmed after a 7 percent plunge in China's benchmark CSI 300 Index triggered markets in Shanghai and Shenzhen to close for the rest of the day, the Bao Viet Securities Corporation (BVSC) wrote in a report.

The drop of China's stock market came after the latest PMI statistics continued to show a slowdown of China's economy and investors feared that big shareholders might be allowed to sell their stock assets, which may result in a major sell-off similar to the one that happened last year, BVSC said.

A slowdown of the economy could also force China to devalue its currency further to boost the country's production and competitiveness, which could hurt other economies, including Vietnam. In addition, the banking sector index dropped 1.8 percent as banks suffered from a weaker Vietnamese dong.

The official forex rate set by the Vietnam's central bank for commercial banks was 22,540 VND a dollar, and the unofficial rate for the black market was 22,670 VND a dollar, an increase of 10 VND.

Banks that were the biggest decliners included Vietcombank (VCB), which fell 1.6 percent, the Bank for Investment and Development of Vietnam (BID), which lost 1.9 percent, and Military Bank (MBB), which dropped 3.4 percent.

Other big stocks also declined and contributed in the market decline. Dairy firm Vinamilk (VNM) was down 1.6 percent and food and beverage producer Masan Group (MSN) was down 2.6 percent.

Both local markets traded nearly 153 million shares worth 2.3 trillion VND (104 million USD).-VNA