HO CHI MINH CITY:

The brightest stars often fall fastest when global booms come to an end. So it was not a sign of confidence that earlier this month the Vietnamese government postponed an annual investment forum that a year earlier had a stampede of cash-rich investors.

Unnerved by a sudden plunge in the stock market, officials panicked.

Now, once-confident investors were left wondering: How vulnerable is this economy, which for a decade has been averaging 7.5 percent growth - the highest in Asia other than China - and was hoping to maintain its recent 8.5 percent rate?

Would local as well as international market turmoil undermine the real economy?

There are certainly signs of distress. Last year's flood of foreign money inspired a stock market bubble that has now burst, leaving prices at roughly half their peak levels.

Meanwhile, credit had until recently continued to grow at a level - a peak of 35 percent - that was clearly unsustainable, in the process shifting the asset-price bubble from stocks to real estate.

Inflation has soared to around 15 percent, driven mainly, as elsewhere in the world, by food and energy prices but exacerbated by easy money and a currency in line with the U.S. dollar.

Official over-ambition delayed credit restraint, but the tough restrictions now in place have driven up interest rates and created stresses within the banking system.

Although state-owned banks still have more than half of total deposits, the private banks were expanding faster and lending more against stocks and real estate. Short of talent and experience, and facing foreign competition in the near future, there may be casualties.

Worries, too, are resurfacing about the nation's current account deficit, which went from under 1 percent to about 6 percent of GDP last year as consumer and investment goods flooded in. Meanwhile, borrowing conditions in international markets have suddenly deteriorated, forcing the postponement of a sovereign bond issue.

These factors might suggest that Vietnam could be hit especially hard as the world follows the United States into a downturn, which is likely to be either long or deep. But it is only half the story.

The stock and property bubbles have been real enough but they have had two positive effects. One was to massively expand the base of the stock market, which even after the decline has a market capitalization of $15 billion, 10 times the level of two years ago. The other was to spur construction to fill the huge demand for apartments, offices and hotels.

It is also easy to exaggerate the dangers to the economy at large of troubles in the financial sector. Vietnam is still an under-banked economy with a savings rate that has been rising fast and should be able to support 7 percent growth without strain.

With foreign debt only 30 percent of GDP, there is headroom for borrowing and direct investment, and development aid more than covers the current account deficit. Foreigners are still net buyers of Vietnamese equities and direct investment remains very strong as commitments made earlier begin to be implemented.

Though the global outlook may have dimmed, and with it demand in Vietnam's major markets for manufactures, Vietnam remains a beneficiary of Taiwanese and Korean manufacturers diversifying away from southern China because of rising costs and a need to spread risk.

Vietnam is also a big net beneficiary of the surge in commodity prices as an exporter of oil, coal, rice, rubber, coffee and seafood, and output of high-value agricultural crops continues to grow rapidly.

More broadly the country probably has several more years of benefiting from joining the Wolrd Trade Organization. Rapid liberalization for foreign goods and services - including banking - will cause problems for some local enterprises but on balance will bring in more capital and spur productivity.

Port, power and road deficiencies remain a problem, and shortage of skilled manpower is a drag on growth. But the government is generally viewed as more business-friendly and less bureaucratic than in the past.

That said, global conditions are likely to be much more difficult now than they were for China a decade ago, or Thailand in the 1980s. In the short run, there may be still more pain for the economy as recent excesses are squeezed out.

Longer term, there looks to be a need to reduce growth expectations as access to capital and export markets becomes more difficult. Yet, relatively speaking, Vietnam looks in good shape and still has a positive story to tell.