THE sub-prime rebound that has been building all week was sealed with style yesterday when the local market powered to a record finish.

A 64.68-point surge led by SingTel and the three local banks pushed the Straits Times Index (STI) to 3,714.77 points - topping the previous mark of 3,665.13 points set on July 24.

It also more than wiped out the ocean of red ink that swamped the market last month and left the STI floundering in a hole at 2,962.01 points on Aug 17.

Yesterday's rise meant the STI has added 25.4 per cent since that dark day.

Setting a new record never really looked in doubt from the opening bell. The STI opened close to 3,700 points before reaching 3,703.44 at lunch time. It then hit an intra-day high of 3,723.32 points at around 4.30pm and never dipped below 3,680 points all day.

The positive sentiment was reflected in the volume of 2.95 billion shares worth $3.14 billion - a huge step up from last week's average of 2.03 billion shares worth $2.31 billion. Gainers trumped losers 555 to 282.

Market experts said yesterday's rise was due largely to 'window-dressing' - parties with vested interests propping up share prices to make themselves look good at the end of the third quarter.

Window-dressing is usually done via last-minute buying of large index components, such as SingTel, banks and property stocks, giving the STI a shot in the arm at the 11th hour.

Strong institutional buying fuelled by Wall Street's overnight rise of 0.72 per cent propelled Index heavyweights.

The chief beneficiary was SingTel, which leapt 18 cents to $4.02, with 55.21 million units done. That alone accounted for an 18.7-point jump for the STI.

SingTel has been popular amid the sub-prime mortgage mess, with analysts describing it as a defensive stock with above-average returns and below-average standard deviations during volatile markets.

SingTel was also highlighted in a Credit Suisse Asian strategy report yesterday, which maintained an 'overweight' call on the Singapore equity.

It noted: 'We remain positive on the market's fundamentals and valuations. However, given the uncertain global macroeconomic outlook, we reiterate our barbell portfolio strategy.

'Growth stocks we like are UOB, City Developments, SembCorp Marine and Raffles Education. Our defensive picks include SPH, ST Engineering, SMRT and SingTel.'

Banking stocks rebounded strongly. DBS Group Holdings added 90 cents to be the day's top gainer, closing at $22. United Overseas Bank (UOB) gained 40 cents to $22.10, while OCBC Bank rose 20 cents to $8.95.

Shipping and oil-related counters also had a field day, as commodity-shipping costs rose and crude oil prices went back above US$80 a barrel.

STX Pan Ocean climbed 10 cents to $3.34, while Cosco Corp added 10 cents to $5.65, after Citigroup analyst Kevin Chong raised his target price by 15 per cent to $6.55 on new contracts won. Keppel Corp surged 30 cents to a new high of $14.30.

Other blue chips also advanced, with Singapore Airlines up 10 cents at $18.90 and Singapore Press Holdings (SPH) up four cents at $4.34.

The optimism extended even to penny stocks, with the UOB Sesdaq Index gaining 0.27 point to 246.57.

alfoo@sph.com.sg