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STOCK markets across Asia staged a modest rebound yesterday, as the wobbly Shanghai market regained its footing, after its eye-watering 5.8 per cent plunge on Monday.
But the rebound was largely attributed to short-covering of sell positions made by traders, as regional bourses came under selling pressure.
Traders were also anticipating more volatility in the days ahead, as the global credit crisis, which started with the outbreak of the US sub-prime crisis in August 2007, enters its third year.
In Singapore, the benchmark Straits Times Index (STI) dropped about 15 points soon after opening bell, extending a decline that had started with Monday's 85.53 point correction.
But Shanghai's 1.4 per cent closing gain gave the STI a much-needed boost. The local benchmark closed 21.74 points, or 0.85 per cent, higher at 2,567.72.
Another source of impetus: While the direction of regional bourses has been largely directed by Wall Street and Shanghai, some research houses have been urging investors to buy on market dips.
Expressing its views on the latest correction, CIMB-GK Research said that the stock market jitters had arisen because of worries that governments would pull back their spending before the global economy got back on its feet.
'We believe that such fears are unfounded, and that this sell-down should provide the perfect opportunity to buy.'
AmFraser Securities' Mr Najeeb Jarhom noted that Monday's sell-off could mark the start of a long overdue correction. 'The broad-based recovery ought to resume before year-end after a correction of 10 to 15 per cent,' he said.
Among the blue-chip gainers here were the three local lenders, which had borne the brunt of Monday's sell-off.
OCBC Bank closed 14 cents higher at $7.77, United Overseas Bank ended 22 cents up at $16.54, and DBS Group Holdings was up eight cents at $12.68.
But it was a mixed picture for property counters, despite news that a record 2,767 units had been sold last month.
CapitaLand rose seven cents to $3.63 and Fraser & Neave gained three cents to $3.93, but City Developments fell four cents to $9.69.
DBS Group Research estimated that sales of new homes had reached about 10,000 units so far this year. It anticipated the buying momentum to slow down, with the start of the Hungry Ghost Month tomorrow.
Some people regard this as an inauspicious period for investors to buy big-ticket items such as homes or cars.
But as crude oil prices continued to soften in the face of weak demand from recession-hit economies such as the United States, rig-builders faced more selling pressure yesterday.
Keppel Corp fell seven cents to $7.69, while SembCorp Marine lost four cents to $3.08.
In the technology sector, Creative Technology fell 18 cents to $5.67. Including yesterday's loss, the counter had fallen about 20 per cent since hitting a 16-month high of $7.08 almost two weeks ago.
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