A PUSH on the three banks in relatively thin volume initially helped send the Straits Times Index up 40 points to 2,785 yesterday but afternoon concerns triggered by a firming US dollar and the associated worry over how Wall Street might react brought the index down to 2,758.79 for a closing gain of just 13.75 points.

Excluding the STI components and derivatives, there were 215 falls versus 144 rises for the broad market, possibly a better indicator of how the session developed as the hours passed.

A one per cent loss for the Hang Seng Index, a 40-point drop in the December futures on the Dow Jones Industrial Average and a soft opening Europe-wide in the late afternoon made for a mostly sombre session, notwithstanding the STI's positive reading.

The afternoon selldown was attributed to an uptick in the US dollar which revived 'carry trade' concerns, or worries that speculators who borrowed cheap US dollars to buy stocks and other risky assets might now have to sell those assets if the US dollar strengthens (or if interest rates rise).

The STI's gain, in the meantime, was largely thanks to rises in the three banks though, in all cases, prices finished off their highs. In its 2010 Asia Outlook, Daiwa Securities said that it has a 'positive' view of banks since non-performing loans (NPLs) look to have peaked in the second or third quarter and should drift down from here on.

'The only factor holding back a more bullish view is subdued loan growth,' said Daiwa. It sees OCBC as the best-positioned bank within the segment thanks to OCBC's purchase of ING Asia Private Bank and DBS as the worst-positioned, saying that for all the billions spent on regional expansion, DBS's primary operations are still only in Singapore and Hong Kong.

Among the other sectors, Daiwa has a 'negative' view on conglomerates as all are either defensive and fully valued, or are rig-builders that have FY2011 earnings risks because of overly-optimistic market assumptions about how fast and how many new rig orders will arrive over the next 13 months.

Sharing Daiwa's view on OCBC is Goldman Sachs, whose Nov 18 report on banks said that OCBC is its only 'buy' because lower NPLs have already been priced in and the banks are trading at mid-cycle valuations. GS picked OCBC for its resilient asset quality, benign credit losses this cycle and the potential of its wealth management business.

Among the penny stocks in the news lately has been China property developer Ying Li, which recently concluded a 253.2 million share placement at 61 cents each. DMG & Partners pointed in a 'buy' yesterday to strong institutional interest in the placement as reaffirming DMG's belief in Ying Li's track record. DMG's revised target price after adjusting for the new shares is $1.12.

In its latest Fund Manger Survey, Bank of America-Merrill Lynch (BoAML) said that respondents report that demand for assets that protect against inflation, such as gold, oil and emerging market equities, has increased.

'Commodities are at their most popular with the panel since the survey first asked about the asset class in 2005. A net 25 per cent of the panel is overweight commodities, up from 11 per cent in October. A net 53 per cent of the panel is overweight emerging market equities, up from a net 46 per cent in October. Assets that protect against deflation, such as fixed income and utilities, are less popular,' said BoAML.