FRESH weakness in the greenback gave a spur to regional bourses yesterday as big funds, which have borrowed in the ailing dollar, kept up their strategy of buying Asian blue chip stocks.

In Singapore, the benchmark Straits Times Index (STI) closed a tad below the 2,800 level, gaining 36.34 points to end at a 15-month high of 2,797.88.

Elsewhere, Hong Kong's Hang Seng gained 1.4 per cent to 22,771.39 as it moved closer to the 23,000 level, while China's Shanghai Composite Index inched up 0.92 per cent and Australia's S&P/ASX 200 Index rose 0.7 per cent.

But despite the gains in stock indexes - made up mainly of blue chips - traders had little to cheer about as the rally failed to inspire the rest of the market. Trading on the local bourse slowed to a snail's pace, with just 1.3 billion shares worth $1.29 billion changing hands.

The lacklustre trading was not confined to Singapore. Investors in other major regional markets such as Hong Kong were also yawning with boredom.

Retail investors in the broader market across the region refused to budge from the sidelines to take up fresh positions as they waited to see which way the economic winds would blow.

Even blue chips slowed a little. Citigroup noted in its latest Fun With Flows report that fund managers - the biggest fans of blue chips - are pouring less money into Asian markets, preferring to chase shares in markets such as Brazil.

'Of all emerging market fund groups, global emerging market equity funds remain the most favoured asset class and inflow last week rose 20 per cent to US$1.8 billion (S$2.5 billion) compared with the same period last year,' it said.

By contrast, Asian funds attracted only US$869 million in fresh funds last week. The average weekly inflow of cash into dedicated Asian funds also plummeted from US$1.3 billion six months ago to just US$420 million last week.

Still, blue chips remained the liveliest part of the market. Observers said fund managers are fixated on blue chips, given their investment strategy of punting on the US dollar. Some have made huge bets that the greenback will keep sliding and have borrowed heavily in US dollars to finance purchases of regional equities.

As the greenback slides, their investments become cheaper. Hedge fund managers, worried that they might be wiped out by any sudden upswing in the US dollar, have focused their firepower on the most liquid blue chips across the region.

In Singapore's case, bank and property counters were the main beneficiaries of the hedge funds' attention.

Yesterday, the biggest gainers included DBS Group Holdings, which rose 32 cents to $15.18; OCBC Bank, which gained 20 cents to $8.68; and United Overseas Bank, which was up 34 cents at $19.82. Property counters also got a boost, with CapitaLand rising six cents to $4.15 and City Developments gaining four cents to $10.46.

The three-week surge in the Baltic Dry Index, a key barometer of shipping costs, lifted shipping-related stocks, with Neptune Orient Lines rising two cents to $1.62. Shipbuilder Cosco rose one cent to $1.13 on a volume of 6.11 million shares. Yangzijiang gained four cents to $1.20 with 49.9 million shares traded.

engyeow@sph.com.sg