A positive lead from Wall Street and a late rally in Chinese stocks on rumoured intervention from Beijing gave local shares a much-needed boost yesterday.
The benchmark Straits Times Index (STI) rose 26.80 points, or 0.94 per cent, to 2,868.74.
Shanghai shares were trading sideways for most of the day, before suspected state buying popped into the last hour of the session and drove the market up 4.9 per cent by the close.
IG market analyst Bernard Aw said a state-designated agency was reportedly buying blue chips.
A growing number of investors are selling bond holdings and buying risk assets like equities and currencies ahead of the US Federal Reserve's decision on interest rates tomorrow, Singapore time, he said.
Traders will be eyeing the US inflation report tonight for clues on the likelihood of a rate hike this month.
Genting Singapore was among the most actively traded stocks, climbing 6.2 per cent or 4.5 cents to 77.5 cents, with 55.3 million shares traded after Macquarie upgraded its call to outperform from underperform.
Mr Somesh Kumar Agarwal, an analyst with Macquarie Capital Securities (Singapore), said the casino operator's stock has fallen 40 per cent in the past year, and believes it has been "sufficiently punished for the Singapore market's declining gross gaming revenues, and its own poor capital management over the past 12 months".
Genting is the cheapest casino stock in Asia by a distance, with Macau shares still trading between nine and 18 times while Philippine stocks are trading between 10 and 13 times, Mr Agarwal said.
Ahead of its inclusion in the STI on Sept 21, Chinese shipbuilder Yangzijiang Shipbuilding climbed 4.2 per cent or five cents to $1.23, with 39.5 million shares traded.
Hyflux jumped 5.2 per cent or 3.5 cents to 71 cents on news that a consortium comprising the water services firm and its partner Mitsubishi Heavy Industries has been chosen by the National Environment Agency to build a $750 million waste-to-energy plant here.
Penny plays, also among the most actively traded, were mixed, with Ezra Holdings up 2.5 per cent or 0.3 cent to 12.3 cents, with 74.4 million shares traded.
Trading of TLV Holdings, the parent company of Taka Jewellery and Lovis Diamonds, is expected to start on the Catalist board today. Jeweller Soo Kee Group, the most recent Catalist IPO debutant which has a market cap of $120.9 million, closed flat at 21.5 cents.
Meanwhile, Healthway Medical Corp, which is the target of an acquisition by International Healthway Corp (IHC), called for a trading halt yesterday. The Singapore Exchange said last week that a "handful of individuals" who appear to be connected to one another have accounted for more than 60 per cent of the trades in IHC since April this year by trading among themselves.