TRADING on the local bourse turned out to be unexpectedly volatile yesterday, as uncertainties erupted on several fronts.
Investors suffered a bout of nerves over just what the United States Federal Reserve will do when it meets tonight, even though a cut in the central bank's benchmark interest rate has been widely expected for days.
Traders fretted over whether the Fed would cut the rate by 0.25 percentage point or 0.5 percentage point - or perhaps even by nothing at all.
On another front, blue-chip stocks here were battered by European funds after a run on a British lender caused widespread market jitters.
Penny stocks also took a belting from investors worried over reports that a businessman had been arrested for alleged share rigging.
The roller-coaster ride of the benchmark Straits Times Index (STI) was a grim reflection of yesterday's darkening market mood.
The STI opened almost flat at 3,535.9 points. It then started drifting down, as banks and recent favourite oil-linked plays, such as Keppel Corp, came under light selling pressure.
But the shocker came when European markets opened just after 3.30pm.
In just 30 minutes, the STI fell by 33 points, as prices of components stocks such as United Overseas Bank (UOB) and DBS Group Holdings were driven sharply lower. Strong selling pressure overcame any resistance put up by buyers.
A further bout of late selling caused the STI's total fall for the day to widen to 60.09 points. The index closed at 3,476.31 points.
The selldown by European funds, said one dealer, was triggered by investor jitters, as the global credit crunch claimed another victim - British lender Northern Rock, which had to be bailed out by the Bank of England.
One casualty of the Northern Rock fallout may be a refusal by investors to roll over their purchases of billions of dollars worth of short-term commercial papers when these mature this week.
Together, the three local banks accounted for over half of the STI's fall yesterday. UOB ended 70 cents down at $20.80, OCBC Bank lost 15 cents at $8.70, while DBS fell 20 cents to $19.40.
Rising oil prices also took their toll on transport stocks. Singapore Airlines fell 30 cents to $18.70, while Neptune Orient Lines was down 33 cents at $4.82.
Still, despite fears of a sharp slowdown as traders stay sidelined before today's Fed meeting, overall market volume hit 2.04 billion shares worth $1.67 billion.
The sharp rise in volume was a result of frenzied trading in penny stocks after news of the arrest of Dr Vincent Tan, chief executive of Advanced Integrated Manufacturing (AIM), by the Commercial Affairs Department over his dealings in AIM shares.
AIM fell 9.5 cents to 23.5 cents on a relatively moderate volume of 3.7 million shares, but a host of other penny stocks suffered collateral damage, as investors fled from highly speculative counters.
Digiland, where Dr Tan was executive chairman, was down 0.5 cent to 1.5 cents on a heavy volume of 257.9 million shares.
Other penny stocks that suffered a selldown included Jade Technology, which fell 4.5 cents to 33.5 cents on a volume of 36.5 million shares; Alantac Technology, which lost four cents to 32 cents with 29.1 million shares traded; and Ban Joo, which was down 1.5 cents at 16 cents on a volume of 22.6 million shares.
Recycling play Centillion fell one cent to 8.5 cents, with 260.4 million shares traded. After the market closed, the company announced that a firm associated with businessman Oei Hong Leong sold 300 million Centillion shares last Friday in a series of off-market transactions.
