WILL the US Federal Reserve end its two-year-old rate hike policy? How much will the US economy slow down and at what impact to corporate earnings? Will the fighting in the Middle East spread and at what cost to oil prices?

All the above weighed heavily on investors' mind and kept at bay any major new commitments to the markets. As a result, markets around the world were drifting rather directionlessly, but with a slight southward bias.

In Singapore, the Straits Times Index struggled to stay above water throughout yesterday. It was pulled down, then bobbed up, then down again, then up for some six times before ending the day just below the surface. At the close, the STI was down a marginal 0.39 point or 0.02 per cent. The second-tier market, however, did better. The UOB Sesdaq Index managed to edge up 0.26 point to 100.05, for its seventh consecutive session of gains.

Overall, excluding covered warrants, gainers still managed to outnumber losers by 197 to 132. Market activities were moderate with 863 million Singapore dollar shares worth $741 million changing hands.

China plays were back in vogue. China Sun and China Milk were the two most actively traded stocks on the Singapore Exchange yesterday. Between the two, nearly 100 million shares were traded. Both ended substantially higher - 4 per cent for the former and 8 per cent for the latter. Other stocks which traded higher on heavy volume were Global Testing, MediaRing, Hengxin, Juitian, China Precision, Bright World, Biosensors and Luzhou.

Meanwhile, property stocks continued to enjoy strong support while the technology sector was shunned.

Asset management firm Schroders' advice to investors is to 'go on holiday along with everyone else'. Its view is that while the slowdown in the US will be benign, and that European, Japanese, and Asian growth will remain robust, the markets will remain vulnerable to swings in sentiment.

'We don't think these more benign conditions are likely until the end of the silly season' and the fourth quarter begins,' said Curt Custard, chairman of Schroders' Global Asset Allocation Committee. 'We remain largely neutral on equities (though defensively biased), short small cap versus large, short debt and credit. We are neutral on currencies. We are looking to add risk assets on dips but maintain a defensive positioning until the markets find their footing and refocus on the larger picture.

'In the interim, so as not to get whipsawed by the market, my suggestion is that you go on holiday along with everyone else!'