Hanoi has a few yarn shops in the old quarter that are worth popping into if you are in the city. I think “Len” is the Vietnamese word for yarn, so look for these signs along Din Liet street. Din Liet is in the pretty much right in the center of the old quarter, just north of Hoam Kiem Lake. The shops are on the east side of the street just north of Cao Go Street.
Most of the yarn in these shops is acrylic brought in from China. They also stock some milk-cotton blend that is quite soft and in lots of nice colours (see pics below) that cost about US$2 a ball. These would be great for knitting projects for babies. The larger of the shops below also sells some kits of alpaca and wool yarn, but read the label carefully as some of these also contain acrylic.