THE local market marched to the tune of Hong Kong yesterday and - to a greater extent - expectations of how Wall Street would perform when it opened on Monday. And going by the weak opening - clearly in response to Friday's US slide - followed by an afternoon rebound, players were betting on the US market recovering its poise on Monday.

Added evidence for expecting this came by way of a 50-point rise in December futures on the Dow Jones Industrial Average and a modestly firm opening Europe-wide. All these factors lay behind the Straits Times Index first dropping below the 2,700 mark to 2,681, before climbing to finish a net 3.58 points higher at 2,711.70.

Turnover, however, was relatively low at 1.7 billion units worth $1.13 billion excluding foreign currency issues, the latter amounting to just 13 million units. Excluding warrants and other derivatives, there were 218 rises versus 147 falls.

Not surprisingly, given that volume last week averaged $1.5 billion, yesterday's session was described by dealers as quiet and largely uneventful.

The inevitable - but largely meaningless - cliches like 'the market is taking a breather' and 'we could see some profit-taking before the next leg up' were bandied about. Perhaps the thought-provoking comment was that 'people are wondering what might the next catalyst be to justify continued buying'.

The biggest drag on the STI was from a 14-cent fall in the shares of the Singapore Exchange (SGX) to $8.34. OCBC Investment Research said on Friday that the exchange's first-quarter earnings of $94 million, reported last week, were within expectations.

But although SGX management cited stronger liquidity, better economic growth, more algorithmic trading and the possibility of larger IPOs in the coming months as reasons for optimism, OCBC Investment Research's recommendation was a 'hold' with an $8.35 fair value estimate.

DMG & Partners, meanwhile, called a 'sell' on SGX, saying its sensitivity analysis shows the stock's price will be $8.80 if average daily turnover (ADT) in FY 2011 is $2 billion or $10 if ADT hits $2.4 billion. 'Investors who assume such levels of ADT can consider trading SGX, but we are not optimistic that these levels would be achieved,' DMG said.

In a 'buy' call on SIA with a $16.20 target, Kim Eng said on Friday that there are strong hints of a recovery in the airline's September load factors, and that although it is expected to report a moderate loss for Q2 FY2010 on Nov 11, the broker expects an improvement in yields for H2. Kim Eng has forecast a full-year net profit of $451 million for SIA. The counter yesterday dropped 12 cents to $14.08.

Among recent second-line favourites has been China developer Ying Li, the subject of several 'buy' calls by local houses and a stock that added 2.5 cents at 85.5 cents yesterday.

A report issued yesterday by DMG set a $1.20 target, despite acknowledging that the stock has outperformed its peers and the STI over the past quarter.

'While the current price/book of 5.2 implies rich valuations, we believe its NAV (net asset value) remains significantly undervalued, given that several properties under development are valued at cost,' DMG said. 'Based on our estimates, Ying Li should trade at 0.7x RNAV (revalued net asset value).'