The blue-chip Straits Times Index finished 108.19 points lower at 1,951.20, after sinking by 6.63 per cent at midday.

Volume totalled 1.41 billion shares worth $1.40 billion dollars, with 416 falling issues, 129 gainers and 783 unchanged.

Short covering occurs when traders, who have sold more than they own in hopes that prices will fall, buy up the contracts as the market starts turning higher, or when they expect it to turn higher.

'On every level when it gets whacked down, you see quite a bit of short-covering. After which, the market stabilises,' one trader said.

The heavy falls in Singapore were in line with drops around the region which dealers blamed on fears for global economic health.

Among property counters, CapitaLand finished eight cents lower at $2.80, City Developments dropped 54 cents to $6.98 and Keppel Land was down five cents at $1.95.

Banks were also lower, with DBS down 76 cents at $13.84, UOB off 58 cents at $15.00, and OCBC down 18 cents at $6.32.

Beverage-maker Fraser and Neave dropped 20 cents to $2.91 and Singapore Telecommunications fell 15 cents to $2.56. Singapore Airlines ended down 52 cents at $12.40. -- AFP