SINGAPORE stocks struggled for direction in a muted day of trading yesterday, even though the market briefly touched a year-high early in the trading day.

For the most part, however, the benchmark Straits Times Index (STI) danced around the psychologically key 2,800 mark in what is turning out to be a typically quiet December season.

The general mood was lethargic as some fund managers had closed their books after window dressing exercises.

Moreover, investors also chose to stay out of the action as they await the United States Federal Reserve's interest rate decision due out later this week.

While the interest rate is not expected to be changed, market participants are expecting clues from the Fed about a possible shift away from the central bank's loose monetary policy.

Volume on the Singapore Exchange was an anaemic 1.23 billion, though this was a slight rise from Monday's 1.2 billion. Losers outnumbered gainers 251 to 205.

Still, the STI managed to hit a year-high level of 2,812.19 in early trading before dipping as the trading day closed to finish at 2,798.70 - a fall of 0.84 points, or 0.03 per cent, on the day.

Mr Ken Tai, senior technical strategist at Kim Eng, said: 'The 2,800 level has been the resistance for the STI for the past few weeks, and the market needs to consolidate before it heads higher.

'However, this won't happen till the last week of December or when we enter the New Year.'

The local banks ended mixed yesterday. OCBC lost 10 cents to close at $8.56 and DBS Group Holdings eased two cents to $14.76, but United Overseas Bank gained eight cents to close at $19.76.

Hyflux gained 11 cents to $3.25 - the counter's highest price this year - as the market reacted to Monday's news of the water treatment firm's joint venture with Japanese engineering firm JGC Corp. Nomura said this should improve Hyflux's margins. JPMorgan maintained its 'overweight' rating on the stock.

Casino operator Genting Singapore gained one cent to $1.09 as it announced its British unit had been awarded a gaming concession to operate a casino at The Nile Ritz-Carlton hotel in Cairo, Egypt.

Other notable gainers included Jardine C&C, up 26 cents to close at $24.98, Fraser and Neave, which advanced 11 cents to $4.16, as well as StarHub, which gained five cents to $2.06.

Markets elsewhere in Asia were also subdued after rebounding on Monday after Dubai received US$10 billion (S$13.9 billion) in emergency aid from Abu Dhabi.

Japan's Nikkei-225 share index fell 0.2 per cent as the yen edged up against the US dollar, putting pressure on shares of exporters.

Hong Kong's Hang Seng Index fell 1.2 per cent, while the Shanghai Composite Index fell 0.9 per cent. The falls came amid renewed fears that China's measures to cool the red-hot real estate market on the mainland could extend to the financial sector as well.

The fears dragged down property and banking counters, such as HSBC, which lost HK$2 on the Hong Kong bourse to close at HK$89.45.

jonkwok@sph.com.sg