Singapore shares rallied after the opening bell yesterday morning amid speculation that central banks in China, Japan and Europe would offer fresh stimulus.
A rebound in oil prices last Friday also fuelled risk appetite as the Straits Times Index rose as high as 2,621.59, up 1.7 per cent, in morning trade.
But profit-taking on what is perceived as a "dead cat bounce" - a temporary but unsustainable rally - sent the index below the key 2,600 level. The Straits Times Index closed just 5.55 points or 0.22 per cent higher at 2,582.64.
Keppel Corp and Wilmar International were the biggest laggards, as oil resumed its downward trajectory, reversing from early gains on short covering and heating oil demand sparked by a massive snowstorm that hit the United States east coast over the weekend.
Keppel fell 4.2 per cent or 21 cents to $4.81, while Wilmar International sank 2.5 per cent or seven cents to $2.68. DBS Group Research, with a "hold" call on Keppel, said that uncertainty over major client Sete Brasil is worrisome, and that the group is weighed down by its offshore and marine business.
"O&M outlook is plagued by the depressed oil prices. Rig-building is entering a prolonged cyclical downturn. Keppel secured $1.8 billion non-rig new orders last year, a far cry from their usual $4 billion to $6 billion wins," DBS said.
Market participants are eyeing the US Federal Reserve meeting later this week for clues on when the first rate hike of the year will occur.
The Fed is not expected to move this week, as expectations for rate hikes have been tempered by extreme market volatility at the start of the year, heightened geopolitical risk and the plunge in oil prices.
ANZ Research says Fed funds futures are pricing just 30 basis points' worth of hikes by the end of 2016 versus 55 basis points priced at the end of 2015.
"The big question now is what the Fed is going to do later this week. A rate hike isn't expected this week because inflation hasn't hit targets yet. The recent oil price slump has pushed inflation data below expectations," remisier Alvin Yong said.
Banking counters and Singtel led the rally, with DBS Group up 2 per cent or 28 cents to $14.15, United Overseas Bank adding 2.2 per cent or 38 cents to $18, and OCBC rising 0.6 per cent or five cents to $7.77. Singtel put on 0.3 per cent or one cent to $3.47.
Innopac was the most actively traded counter, plunging 33.3 per cent or 0.1 cent to 0.2 cent, with 83 million shares traded. Noble Group also made the list, dipping 1.7 per cent or 0.5 cent to 28.5 cents, with 52 million shares traded.
UG Healthcare was queried by the Singapore Exchange over unusual price movements, its second in the past three months. The firm said it was not aware of any reason for the trading. Its shares plunged 31.8 per cent or 14 cents to close at 30 cents.