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IT WAS Europe's turn to cause grief to the local bourse yesterday, one day after a sharp fall in Shanghai sent shares tumbling across the region.
Traders were initially cheered by the stabilisation of the Shanghai market, but new trouble arose with weakness emerging in London and Frankfurt amid late Asian trading.
Adding to the gloom was the start of trading for September - traditionally the year's most turbulent trading period.
And given the lack of local leads, with the ending of the corporate reporting season, traders turned to the larger markets for direction.
The benchmark Straits Times Index (STI) initially rebounded by as much as 41 points after China released positive numbers for the purchasing managers' index, signalling that its huge manufacturing sector was growing at a healthy pace.
But the STI lost most of its gains, ending only 3.49 points higher at 2,596.39, as worries over the sustainability of the global commodities boom spooked sentiment on European markets.
Despite the late sell-off, local blue chips were able to notch up some gains. These included DBS Group Holdings, which rose eight cents to $12.72 after announcing yesterday that it had recruited Citibanker Piyush Gupta as its chief executive, after a five-month search.
Rig-builders were given a boost as crude oil prices stabilised after falling 4 per cent on Monday. Keppel Corp rose 11 cents to $7.72 and Sembcorp Marine gained three cents to $3.12.
Among other blue chips, Genting Singapore dropped one cent to $1, after luring buyers in large numbers recently as they looked forward to the opening of its Sentosa integrated resort next year.
Elsewhere, penny stocks continued to grab attention, as huge volumes of trades were generated when traders switched from one counter to another.
Sinotel Technologies gained 7.5 cents to 60.5 cents on a huge volume of 156.4 million shares. Other actively traded counters included China Hongxing Sports, which rose 0.5 cent to 25 cents with 83.8 million shares traded, and plantation firm Golden Agri-Resources, which fell one cent to 46.5 cents on a volume of 107.9 million shares.
Some traders were befuddled over the sudden interest in these counters.
'Nobody seems to be able to explain why some of these stocks suddenly burst into life,' said a dealer.
Despite yesterday's stabilisation, anxiety over the volatile Shanghai market continued to top the concerns of dealers.
Some traders attributed Shanghai's precipitous 6.7 per cent plunge on Monday to the panic triggered by a report in China's influential Caijing magazine that some mainland firms might be allowed to default on their commodity derivative contracts.
As China's huge purchases of raw materials had made it a key player in the global commodities market, there were fears over the implications of such a move.
This had, in turn, triggered a sell-off on resources stocks on Wall Street and European markets, which were among the biggest beneficiaries of the global stock rally since March.
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