Half of the 20 most active stocks are China companies, with many showing handsome gains

A CONTINUED cloudy outlook on the interest rates front kept many investors sidelined yesterday, but punters appeared to have returned to the second-tier market, albeit in a small way.

Yesterday, the Straits Times Index spent the first half of the day below water. But it managed to claw its way back in the second half.

DBS Group, Keppel Corp, Singapore Telecommunications and Singapore Airlines tussled with OCBC, Jardine Matheson, Jardine Strategic, TPV and ST Engineering to decide which way the STI would go. Finally, the first group edged ahead, resulting in a 2.49-point gain for the blue chips index to 2,329.6.

There were 22 index gainers against 16 losers, with the remaining 12 unchanged.

But the real action was in the small-cap sector, in particular among the China stocks. Half of the 20 most actively traded stocks were Chinese companies, and many posted good gains.

For example, radio frequency (RF) coaxial cable manufacturer Hengxin surged almost 11 per cent with 35.7 million shares changing hands. China's largest producer of corn sweetener, Luzhou Bio-Chem Technology, advanced 6 per cent on a volume of 16 million. Other gainers on heavy volume included chemical company Jiutian (up 12 per cent), China Precision (7.6 per cent), and Bright World (8 per cent).

All except one of the 25 most actively traded stocks ended firmer yesterday. The exception was United Fiber System, which also topped the actives list with 43.7 million shares traded. The company plunged to 19.5 cents before closing at 21 cents for a loss of three cents or 12.5 per cent.

Last Friday, the pulp and paper company with forestry assets in Indonesia said that it partially repaid its loans to Cornell Capital Partners with a delivery of 12.6 million Unifiber shares.

The overall tone was firm. Excluding warrants, gainers outnumbered losers by 211 to 106. Some 808.8 million Singapore-dollar shares worth $817.3 million were traded.

Elsewhere in the region, performance was mixed. Hong Kong and Australia were slightly positive, but Japan and Taiwan were marginally weaker.

Analysts said investors should not expect a respite from the market sell-off in the days ahead, given fears of higher borrowing costs, diminishing risk appetite among foreign investors, and the traditional summer lull.

'We just can't see why markets would suddenly just turn around and perform very strongly,' Reuters quoted Markus Rosgen, regional head equity strategist at Citigroup in Hong Kong, as saying.

Hugh Young, managing director at Aberdeen Asset Management Asia Ltd which has $25 billion in funds in Asia, said: 'We are still in no man's land, but are more comfortable now given that markets have pulled back.'