THE Straits Times Index (STI) yesterday continued to ride on the momentum generated by last week's end-of-quarter window-dressing, news of yet another bailout deal for European banks and hopes of a stimulus from the European Central Bank (ECB), finishing 34.74 points higher at 2,945.33. This brings the index's five-day gain since last Wednesday to about 140 points, or 5 per cent.
Turnover, however, showed signs of tapering off - 1.7 billion worth $1.3 billion were traded excluding foreign currency issues, down from Friday's $1.7 billion. Excluding warrants, there were 219 rises versus 135 falls in the whole market.
The average unit value traded was 75 cents, still in penny territory but not firmly so. Still, apart from Noble Group and Genting Singapore, the rest of the top 10 actives were priced under $1 each while five cost under 10 cents.
"Activity in our dealing rooms and even our central dealing is slowing again after a very brief spike last week," said a dealer. "It's back to no business - as usual."
Overall volume was boosted by 86 million shares traded in Noble, which finished 0.5 cent weaker at $1.15. The value of Noble's trades was $98.5 million.
Also in the top 10 actives was TT International, which fell 0.3 cent to 6.9 cents after 52.2 million shares changed hands. The electronics company's shares have come under pressure in recent days following news that a rescue deal to develop a warehouse retail project in Jurong has hit a snag.
Elsewhere in the actives list was United Fiber System, which rose 0.1 cent to 5.4 cents on turnover of 27 million. The company is involved in a large, reverse takeover deal with an Indonesian coal mining firm.
Hong Kong stocks closed higher yesterday and European markets opened marginally in the black. Underpinning these gains was hopes of interest rate cuts by the ECB.
"The majority of the market expects 25 bps off the refi (re-financing) rate at Thursday's ECB meeting, though a minority also argue for 50 bps and the market is split on whether a 25 bps cut will be seen in the deposit rate," said financial research firm Ideaglobal.
"The worsening macro conditions in Q2, plus greater financial instability, since the June ECB meeting are seen to be the key motivators for the change. Nevertheless, the ECB could do more in light of the latest weak lending figures and as the eurozone Q2 recovery hope will have to be postponed, which still appears to have been underestimated by the financial markets. Thus the ECB is likely to try to deliver a positive surprise and the key question is whether this will be small or large."
In commenting on the latest US manufacturing numbers, DBS Group Research said that the drop below 50 in the June ISM (Institute of Supply Managers) index should serve as a significant wake-up call to investors and the Fed alike.
"Yes, it was influenced by the chaos in Europe but it was backstopped by nine months of fundamentally slowing growth at home that most ignored, seemingly deliberately," said DBS. "The 47.8 reading says orders are falling mildly - that's nothing more and nothing less than what durable goods orders have been doing for 10 full months: drifting aimlessly sideways-to-downwards. This sideways drift is what delivered near-zero business investment growth for the past two quarters and will do so again for a third quarter when the Q2 GDP report is released at month's end . . . For now, it's just another lousy number in a very long string of them."