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A FLURRY of buying activity in the final half hour of trading yesterday drove the local stock market to its highest closing level in the past year.
The benchmark Straits Times Index (STI) added 21.26 points, or 0.81 per cent, to 2,643.95, extending gains into a third straight day. Yesterday's close was the highest since Sept 8 last year, when the index stood at 2,697.03.
Across Asia, markets were also upbeat, with Hong Kong's Hang Seng Index gaining 1.53 per cent and Toyko's Nikkei Average rising 1.31 per cent.
Markets got a lift from better-than-expected US jobs data last Friday and a decision by the G-20 group of nations to maintain economic stimulus packages.
Back at home, trading volume was 2.4 billion worth $1.46 billion, with trading activity centred on small-cap stocks, which have outperformed their larger peers in this market rally.
Small-cap manufacturing-related stocks enjoyed a field day. HG Metal surged 1.5 cents, or 10.7 per cent, to 15.5 cents on 35.54 million shares traded.
Global Test, which provides testing services for semiconductor manufacturing, jumped one cent, or 11.11 per cent, to 10 cents with 22.96 million shares traded. Stats ChipPac rose for a fifth straight day, up five cents to 94.5 cents. Plastic injection mould firm Fu Yu Corp surged two cents, or 15.38 per cent, to 15 cents after a 23.8 per cent jump last Friday.
The FTSE ST Small Cap Index has shot up 86.4 per cent for the year, compared to a 44.5 per cent gain in the STI. However, some analysts have sounded a note of caution on this speculative fever.
DBS Vickers said the 'recent divergence of interest from blue chips/mid-cap stocks into penny stocks' is 'an unhealthy development if the trend continues'. It also said the STI runs the risk of a correction to the 2,408 level.
Chartered Semiconductor fell seven cents to $2.59, reversing a four-day gain, after Abu Dhabi's state fund Advanced Technology Investment Co (ATIC) offered $2.68 per share to buy out the company, valuing the firm at $2.5 billion.
'There is room for Chartered's share price to appreciate above this offer price,' said DMG Research analyst James Lim in a note, adding: 'We believe that Chartered is currently riding on an upswing in the semiconductor space similar to the one seen during February 2005 to February 2006.'
It is expected to turn profitable next year, he said, raising his target price to $3.14 from $2.77 - maintaining a 'buy'.
Among the blue chips, only six stocks bucked the uptrend. DBS Group Holdings led gains, adding 14 cents to $12.96, while CapitaLand rose seven cents to $3.84.
Genting Singapore, the most actively traded stock with a volume of 183.29 million, surged five cents to $1.17.
M1 rose five cents to $1.83 after it said its unit M1 Net agreed to buy Internet service provider Qala Singapore for $14.9 million. 'There is little clarity on Qala's financials but we believe M1 did not overpay,' said CIMB-GK analyst Kelvin Goh. 'We see the rationale of the acquisition as providing M1 with a foothold in the corporate fixed broadband space.'
US stock markets were closed yesterday for the Labour Day holiday.
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