COMING off a difficult week when the spectre of a Spanish banking sector crisis and a potential Greek exit sent markets into a tailspin, this week kicked off in somewhat calmer fashion.

Regional markets made modest gains amid Greek opinion polls indicating that pro-austerity parties could be making gains heading into the upcoming polls next month. But sentiment remains frayed amid the very real danger of a eurozone financial turmoil triggered by a potential Greek exit from the Euro.

Down

Nevertheless, the Straits Times index, which has fallen some 7 per cent this month, managed a 14.47 points gain to 2,787.22 points.

Among the heavyweight gainers were SIA, which gained 14 cents to $10.50; F&N which edged up 10 cents to $6.57; and DBS which gained 12 cents to $13.29.

Crane lessor Sin Heng Heavy Machinery was heavily sold down to 21.5 cents following a change in substantial shareholding last week.

The stock had been chased up to 26.5 cents last Friday in the lead-up to an announcement that Toyota Tsusho Corporation (TTC), a member of Toyota Motor (Corporation) Group, had bought a 27 per cent stake, or 123.8 million shares, in the company for $26 million or about 21 cents per share.

The seller was private equity group SEAVI Advent Equity V (C) Ltd, which had a 38 per cent stake in the company. Brokers here speculated that the remaining 11 per cent had been placed out to parties who were the sellers cashing out on Monday.

Elsewhere interest was spread among the usual suspects in the penny stocks sector.

Despite the tick-up by the benchmark indices here and around the world (Wall Street was closed for Memorial Day yesterday), few hold out hopes for a sustained market recovery.

At least not when Spanish banks are putting out cash calls, the uncertainties of the Greek political process remains front and centre and the European Union holds back much needed injection of fresh cash until a stable Greek government is in place.

"Well, the market was looking oversold in the short term, which is why we saw a slight recovery," said Vasu Menon, vice-president for Wealth management at OCBC.

He added that despite occasional bouts of optimism, the underlying problems in Europe remain complex, with policymakers forced to come up with a cocktail of austerity measures tempered with policies to spur growth.

"Besides the issues in Greece and the Spanish banking sector worries, there is also the Irish referendum on the EU fiscal pact on Thursday which markets will be watching closely," he said. "We are telling people to be very cautious. This is not the time to get aggressive, especially on commodity or high beta plays. If you are predisposed to buy, nibble on fundamentally supported stocks, yield plays and bonds."

Market insiders reckon that the uncertainties will grind on until the end of June, when the European Summit will have to debate policy options to prop up the flagging continental economies, including the issue of Euro bonds (which Germany opposes) or the European Redemption Fund (which some see as the only viable option).

Meanwhile, stock markets are likely to see-saw to daily newsflows from the continent.