BIG JUMP: Indian investors watching share prices in Mumbai yesterday. India was the best performer among regional bourses, with the Mumbai Sensex Index jumping 5.94 per cent. -- PHOTO: AFP

The Straits Times Index soared 88.32 points, or 3.06 per cent, to close at 2,978.98. It has now risen 131.25 points this week.

Trading activities also revived in a big way. Overall volume hit 1.37 billion shares worth $1.76 billion - a dramatic increase on the 824.22 million shares traded on Tuesday.

One trader said there was a panic buying of blue chips, particularly banks and property firms, as investors scrambled back into the market for fear that they might miss out on the action altogether.

It was much the same across the region as investors from Sydney to Mumbai responded to a welter of positive signs.

One was hopes that sagging crude oil prices would take the sting out of the inflation risk, while Wall Streeters are feeling a touch more optimistic that battered United States financial giants are on the mend after their latest round of massive write-offs.

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The upbeat mood was also helped by the ailing greenback strengthening against major currencies such as the Japanese yen and the euro as confidence returned to troubled global credit markets.

The buoyant opening was triggered by oil's overnight slump of about US$5 a barrel as fears eased over the impact Hurricane Dolly might have on production in the Gulf of Mexico.

But it was a further drop of US$1.57 to US$126.85 a barrel during the trading day that really caused Asian markets to go wild.

As well as the obvious benefits of falling oil prices in the form of increased consumer spending, they will help the 'outsourcing' model used by China, where manufacturers are facing a big squeeze in profit margins due to soaring transport costs.

Investor appetite had also been boosted by the sharply lower valuation of regional equities after the many rounds of selldowns this year.

Citigroup argued yesterday that while Asian markets 'may not be cheap, they have ceased being expensive'. So while regional investment sentiment had deteriorated sharply, it believed that any continuous rebounds 'would suggest a buying opportunity'.

Leading the charge here were the battered property giants City Developments, up 94 cents to $11.70, and CapitaLand, which rose 40 cents to $6.15.

Other big gainers included DBS Group Holdings and United Overseas Bank, both up 56 cents to $19.72 and $19.28 respectively on hopes they might benefit from any sharp pick-up in regional economies.

Falling oil prices also hoisted Singapore Airlines sharply higher, gaining 60 cents to $15.86.

The rally in blue chips spilled over into the broader market, with the FTSE ST China Index gaining 4 per cent, as investors snapped up China plays that might benefit from the Beijing Olympics.

Among regional bourses, India was the best performer, with the Mumbai Sensex Index jumping 5.94 per cent while Taiwan's Taiex Index gained 3.46 per cent.

The jubilation yesterday, after months of gloom and nerve-racking volatility, prompted local remisier Thomas Lee to raise the big issue: 'A lot of people are asking themselves: Is this the great turning point that everyone is looking forward to?'

engyeow@sph.com.sg