Local stocks joined regional markets in a surprising rebound yesterday even though the Greek debt crisis shows no obvious signs of settlement.
Investors may be betting on a last-minute resolution, but the days ahead look uncertain, analysts said.
The benchmark Straits Times Index (STI) closed 37.15 points or 1.13 per cent higher at 3,317.33, recovering from the 1.23 per cent drop on Monday. The momentum was strong throughout, with the index surging to as high as 3,324 and staying above 3,310 most of the day.
Noble Group was the top-gaining blue chip, ending four cents or 5.56 per cent higher at 76 cents. It was also the most active counter with more than 55 million shares changing hands, pointing to further institutional action in the background after Noble's recent share buybacks.
All three banking stocks gained ground after being sold down on Monday. DBS Group Holdings closed 39 cents or 1.92 per cent higher at $20.69. OCBC rose eight cents or 0.79 per cent to $10.18, and United Overseas Bank ended 17 cents or 0.74 per cent higher at $23.07.
IG market analyst Bernard Aw said: "Alongside the Greek scares, expectations on further recovery in the United States economy and Fed rate hikes this year still remain.
"Banks will still be the choice defensive plays for investors who decide to stay in the market in this turbulent time.''
Only five index stocks closed lower. Genting Singapore fell the most on the STI, closing 0.5 cent or 0.56 per cent to 89.5 cents. Sembcorp Industries pared two cents or 0.51 per cent to end at $3.89. Analysts say more wild swings are possible ahead of Greece's referendum on austerity measures this weekend.
Mr Aw said: "I still see this as a technical rebound. Investors are perhaps a bit complacent on Greece, where the situation can still go both ways. The referendum is the next key event to watch, and if Greeks vote 'no', markets worldwide will definitely be hit.''
OCBC Investment Research head Carmen Lee said: "The local bourse has moved in tandem with global markets as concern over Greece took centre stage.
"As a result, market volatility is likely to persist for the near term, with headlines from Greece and China leading market directions.
"Until greater clarity emerges, we expect the Singapore market to trade cautiously for the near term between 3,250 and 3,360, supported by undemanding valuations at the lower end of the band."
All major overseas markets were up yesterday, recouping ground after Monday's drubbing.
China's government unveiled draft rules that will allow pension funds to invest in stocks.
This pushed Shanghai up 5.53 per cent after it fell 5.1 per cent in the early trading hours. Hong Kong closed 1.09 per cent higher, Tokyo gained 0.63 per cent and Kuala Lumpur was up 0.87 per cent.