A D.C. Superior Court judge found Tran Van Khiem competent yesterday to stand trial on charges that he murdered his elderly parents, both former Vietnamese diplomats, in July 1986.

Khiem's parents, Tran Van Chuong, 88, and Nam Tran Tran Van Chuong, 75, were found suffocated at the Western Avenue NW home they shared with their son and Khiem, 60, was arrested the next day. He pleaded not guilty earlier this year.

Khiem's parents first came to the United States in the 1950s when his father was named ambassador to the United States and his mother was the country's permanent observer at the United Nations. Khiem's younger sister is Madame Nhu, who was also known as the Dragon Lady, the wife of South Vietnamese President Ngo Dinh Nhu. Nhu was assassinated in 1963.

Khiem's competence to stand trial has been an issue since his indictment in April. At yesterday's hearing, D.C. Superior Court Chief Judge Fred B. Ugast said two groups of psychiatrists, one at St. Elizabeths Hospital and another retained by government prosecutors, determined Khiem is competent.

A finding of mental competence means that a defendant is able to communicate with his attorneys and help them in preparing his defense.

Khiem's attorneys endorsed Ugast's ruling.

Ugast said that because Khiem has said he believes he is the victim of a massive conspiracy directed against himself, President Reagan and others, he will continue to monitor Khiem's appearance and behavior and will seek another mental assessment during the trial if there are reasons to believe Khiem is no longer competent.

Ugast also said the psychiatrists determined that Khiem would not be able to use the insanity defense although he was found to have a form of personality disorder and a mild form of organic brain disease.

Because of that finding, Ugast said, he ordered that Khiem continue to be held at St. Elizabeths Hospital under psychiatric care until his trial, which Ugast scheduled to begin on March 3.