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SOME of the bulls rampaging across the region were reined in yesterday by news that French bank Societe Generale (SG) had uncovered a 4.9 billion euro (S$10.3 billion) fraud - one of history's biggest.
The revelations hit just as Hong Kong was about to end trading for the day, sending investors into a knee-jerk sell-off. Tokyo and Sydney had already closed, and they finished on high notes.
But Singapore, which closed one hour after news of the SG fraud, had time to digest the story, file it in the 'nothing to do with us' basket and carry on buying.
The Straits Times Index (STI) ended up 2.2 per cent, or 66.47 points, at 3,050.09, well off its day's low of 3,043.
It had earlier surged by as much as 148 points, or 5 per cent, giving it a record gain of 265 points over two days.
The SG news was more of a blip on a day dominated by Wall Street's spectacular overnight rebound, which gave regional markets the confidence to continue their recovery from the nightmare falls early this week.
The Dow Jones Industrial Average was up 88.12 points, or 0.72 per cent, at 12,358.29 as at 11.15pm Singapore time yesterday.
In Singapore, there were some laggards though. The Singapore Exchange gave up some of its hefty gains to close 91 cents up at $10.10, after hitting a high of $10.70.
Financial giants such as DBS Group Holdings and United Overseas Bank (UOB) ended well above their day's lows.
DBS closed 66 cents higher at $18.46, off its low of $18.00, while UOB ended 56 cents up at $17.58 after it hit a low of $17.18.
'Investors here are viewing SG as an isolated problem. Even though the size of the fraud is staggering, there is no danger of a systemic risk to the global financial system,' said a dealer.
The United States government's plan to rescue troubled bond issuers, which sent Wall Street swinging to a 300-point gain from a 300-point loss, was far more important.
Bond insurers guarantee payments of bonds and other debt packages issued by financial institutions. Their failure could spark another round of massive write-downs by global banks on already shaky balance sheets.
'This is like 1998, when the Fed cut interest rates and persuaded the banks to shore up the Long-Term Capital Management hedge fund, which was threatening to bring down the global financial system with its default,' said a trader.
China stocks were snapped up like hot cakes yesterday, as investors reacted to news that domestic funds established in China could now invest in the local market.
Cosco Corp rose 48 cents to $4.68, while Yangzijiang gained 14 cents to $1.39. This helped boost the FTSE-ST China Index by 7.7 per cent to 567.22.
Traders were partying on the broad market, believing the worst of the selling pressure was over. There were 594 gainers and 288 losers, with 2.42 billion shares worth $3.41 billion changing hands.
The FTSE-ST Mid-Cap Index gained 14.6 per cent to 752.91. Component stocks such as Venture Corp rose 82 cents to $10.02, while Wing Tai gained 11 cents to $2.24.
Penny stocks also enjoyed a remarkable revival, with the FTSE-ST Small-Cap Index gaining 13.3 per cent to 671.88. Big gainers included Celestial Nutrifoods, up five cents at 71 cents, and Datapulse Technology, which gained 1.5 cents to 21 cents.
The rally has raised analyst hopes that the STI will advance to 3,250 points as the Chinese New Year approaches.
engyeow@sph.com.sg
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