SINGAPORE'S stock market defied losses elsewhere in the region yesterday, rising for the fifth straight day on optimism the local economy will turn the corner sooner than expected.

The benchmark Straits Times Index (STI) gained 27.96 points - or 1.05 per cent - to 2,680.47, its highest close in more than two weeks.

The five straight days of gains also form the longest winning streak since the week ended Aug 28.

The Government yesterday lifted its forecast for the economy to shrink 2 per cent to 2.5 per cent this year, a sharp improvement on its earlier forecast of a 4 per cent to 6 per cent contraction.

Despite the upbeat mood however, some investors were cautious on trading ahead of the corporate earnings season.

Trading volume fell for the third consecutive day to its lowest level in three months, with a meagre 1.47 billion shares worth $1.11 billion changing hands.

Investors should adopt a 'sell-on-strength mentality if the STI were to build on the gains it experienced last week, as the rally has not been a convincing one', said DMG & Partners Research's technical analyst James Lim.

'The risk-to-reward ratio is not favourable for those looking to engage in long positions,' he added.

Other markets in Asia were in the red, snapping a four-day rally. Hong Kong's Hang Seng Index lost 0.93 per cent, while the Shanghai Composite Index fell 0.59 per cent.

Gains at home were led by SingTel and banking stocks. SingTel added five cents to $3.13 with 22.75 million shares traded.

But some analysts are cautious on the stock.

'With SingTel paying more for English Premier League content and charging consumers less, we do not see recovery of even its content costs,' said DBS Vickers.

It added that EPL alone may lower the telco's earnings by between $40 million and $50 million, or 1.5 per cent, a year in the next two years.

Rival StarHub, which lost the EPL deal to SingTel, added three cents to $2.

United Overseas Bank added 32 cents to $16.74, DBS Group Holdings rose 10 cents to $13 while OCBC gained six cents to $7.68.

Of the 30 STI component stocks, only Jardine Matheson declined, losing 50 US cents to US$30.48.

Palm oil stocks were given a boost as the price of crude palm oil continued its ascent. Wilmar International rose seven cents to $6.45, Indofood Agri added two cents to $1.72, while First Resources rose 1.5 cents to $91.5 cents.

Chemoil Energy slumped 2.4 US cents or 4.55 per cent to 52.5 US cents, its lowest level in a month.

The company, which will announce third-quarter results next month, said it expects to post a quarterly loss as 'business operations of the group have been negatively impacted by unusually weak fuel oil margins in many of our market segments worldwide'.

Ezra Holdings surged 12 cents or 6.25 per cent to $2.04, its highest close since Sept 18, after one of its units reported a contract win worth US$11.2 million.

yanghw@sph.com.sg