EVEN as global equity markets hit new highs for the year last week, there was a renewed vigour in the debate over whether the seven-month-old rally can be sustained.

The advance in share prices was due to a slew of forecast-beating reports from US multinational giants such as Microsoft and Apple Computer.

This had raised hopes that the United States, the world's No.1 economy, is slowly back up on its feet, after being brought to its knees by the global financial crisis.

In Asia, there was the spell-binding news that China had again surpassed all expectations by posting a robust 8.9 per cent growth in the third quarter. Bulls broke out into a stampede across the region, buoyed by expectations that the US and China would provide impetus for growth, going forward.

For the week, the benchmark Straits Times Index (STI) in Singapore gained 7.22 points to a fresh one-year high of 2,715.34.

Despite the exuberance, there were sufficient bears lingering about to cast doubts over the durability of the rally. They noted that last week's region-wide run-up in share prices had not been accompanied by a similar jump in trading volumes.

Indeed, a check with remisiers showed that most of their clients were quite contented to sit on the sidelines, skipping the rally altogether.

'The activities are mostly generated by dealers buying and selling among themselves. Unless you are keyed to one of the situational plays now making its rounds, you are not likely to be a participant in this market,' said local brokerage dealer Thomas Lee.

Others observed that stock indexes are experiencing difficulty breaking out of their current range.

On Wall Street, the Dow Jones Industrial Average has been gyrating around the 10,000 level for over a week now without being able to breach it decisively.

The same goes for the STI, which has been trapped around the 2,700 level.

One concern among investors is the worsening unemployment in developed economies despite the improving economic data. Sure, many US firms have reported improved profits in their third-quarter results. But that had often not been due to better sales, but rather to cost-cutting.

Add to this the worry that in countries such as China, the economic rebound had been largely abetted by huge government stimulus packages. This raises fears that the stock market rally may lose its wind once such stimulus measures are removed.

As for the softening greenback, while its weakness has lured 'hot' money into the region in search of higher returns, it has also spurred a run-up in crude oil prices.

But this may, in turn, translate into higher energy and transportation prices and cause a price hike in everything from electricity to staples like rice.

Financial markets may be kicking up like raging bulls once more, but there is an unmistakeable edginess in the air as investors mull over the road-blocks ahead.

engyeow@sph.com.sg