SINGAPORE, Aug 2 (Reuters) - Singapore's Straits Times Index was up 1.29 percent at 0126 GMT (0926 Singapore time)

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Singapore Airlines , the world's biggest airline by market value, fell as much as 3.7 percent, or S$0.70, to S$18.20 as the stock went ex-dividend on Thursday.

The payout will comprise a full-year and special dividend totalling S$0.85 for the 12 months to the end of March 2007.

Singapore Airlines on Wednesday said quarterly net profit fell 26 percent in the absence of one-off gains, and that the high price of jet fuel remained its biggest headache. But underlying profit rose, reflecting strong demand for air travel and higher ticket prices.

Merrill Lynch raised its price target for Singapore Air shares to S$22.80 from S$21.40 on the back of higher profit expectations and said it recommended investors "buy" the stock.

But Citigroup called a "sell" for the stock, with target price of S$19.19, and recommended "investors to sell into any market rebound".

"Although results beat forecasts, we do not expect significant upward earnings revisions given the 29 percent rebound in fuel prices and SIA hedging only 3 percent below spot," Citigroup analyst Corrine Png said in a note.