Shares edged higher on the back of a rally in US and European markets and buying by institutions in local banks. The more buoyant mood lifted the Straits Times Index 0.21 per cent or 6.07 points to 2,949.12.
Bank stocks are on a tear with a rate hike in the United States looking more certain after another solid month of job gains in the world's largest economy. Higher interest rates help boost net interest margins.
DBS Group jumped 1.1 per cent or 19 cents to $18.16, OCBC gained 0.8 per cent or seven cents to $9.27, while United Overseas Bank rose 0.2 per cent or five cents to $20.83.
The market also got a boost from Hongkong Land, which climbed 2.1 per cent or 13 US cents to US$6.40. UOL Group jumped 3.2 per cent or 19 cents to $6.15 and Genting Singapore put on 1.6 per cent or 1.5 cents to 98 cents.
Oil and gas counters came off as oil prices dipped on profit-taking after the sharp rally that followed last week's Opec deal to cut output.
Keppel Corp fell 0.3 per cent or two cents to $5.90, Sembcorp Industries dropped 0.3 per cent or one cent to $2.91, while Sembcorp Marine lost 0.7 per cent or one cent to $1.46. KrisEnergy slipped 3.1 per cent or 0.6 cent to 18.9 cents.
UOB KayHian upgraded its call on the oil and gas sector to market weight, saying that even though "bankruptcy and contagion risks still remain, the candidates have mostly been identified and any fallout should be contained".
The broker said: "We expect continued oil price volatility in the near term. We expect oil and gas stocks to trade in line with oil price sentiment in the near term."
Sembcorp Industries remains the broker's top pick within the sector, given its "utilities segment's earnings growth and exposure to oil", UOB KayHian said.
DBS Group Research upgraded its call on SembMarine to hold from fully valued, citing an improving oil and gas outlook following Opec's successful agreement to cut output.
"We believe a gradual recovery in oil prices and rig market towards 2017 will set the stage for rising newbuild demand," the broker said. "However, the operating environment remains challenging with yard overcapacity."
Meanwhile, Cityneon was queried by the Singapore Exchange after the exhibition firm gained 5.5 per cent or 5.5 cents to $1.06.
The most actively traded included Noble Group, down 0.6 per cent or 0.1 cent to 16.6 cents, with 178.5 million shares traded, China Medical International, flat at one cent on trade of 52.6 million, and Yuuzoo, up nearly 2 per cent or 0.3 cent to 15.5 cents with 41.5 million shares changing hands.
Pacific Radiance fell 5.8 per cent or 0.9 cent to 14.6 cents after disclosing that executive director Mok Weng Vai was arrested on Dec 2 on suspicion of a breach of the Prevention of Corruption Act. Mr Mok has not been charged and was released on bail the same day.