Double-digit percentage gains were then being achieved by the more fancied counters almost daily, without anyone so much as batting an eyelid.

Trading turned so frenzied that one penny stock, Ban Joo, chalked up 581 million shares in volume on a single day.

A week later, however, the rally in penny plays came to a screeching halt as fears of a global credit crunch sparked by a severe mortgage crisis in the United States sent Asian bourses into free fall.

Now, after 12 months of roller-coaster price swings, even the most optimistic investors are starting to realise that there are no quick fixes to the US sub-prime crisis and more trauma might be in store.

Singapore's penny stocks have been among the biggest victims of the global stock market crash.

With retail investors fleeing the market, the UOB Catalist Index, which tracks small-capitalisation firms, has fallen by 58 per cent from its peak in July last year. In contrast, the benchmark Straits Times Index (STI) is down by 20 per cent.

Overall trading volumes on the Singapore Exchange have also taken a big hit, dwindling to just over one billion shares a day from about three billion a day last year.

The market has suffered wild mood swings over the past year.

Last September, hopes ran high that the so-called 'repricing' of risks, as investors reassessed the value of dodgy US home loans, would mean only a brief interruption to the five-year-old bull run.

Those hopes were dashed by a massive sell-off in January, only to be revived in March, when many declared that the worst of the global crisis was over, following the bailout of Bear Stearns by the US central bank.

Last week, however, any residual hope probably evaporated as the US government unveiled a massive package to shore up mortgage lenders Fannie Mae and Freddie Mac, which back half of all US home loans.

Global banks at the epicentre of the US crisis have been badly hit. Last week, the share prices of Merrill Lynch and Citigroup began to resemble those of local penny stocks, making double-digit percentage swings.

Is the US financial system truly in dire straits? Given the impact on the rest of the world, traders certainly hope not.

For Asian investors, the current woes on Wall Street bear an unnerving resemblance to a plunge experienced by regional bourses a decade ago.

In May 1998, markets dived following a sharp rebound as ailing currencies and economies shook confidence across Asia.

What pulled them out of the rut then was a catalyst that helped them stage a spectacular run-up the following year. The trigger came in August 1998 when Hong Kong spent billions to prop up its stock market and Malaysia imposed capital controls to stop speculators from attacking the ringgit.

Wall Street also needs a catalyst to shake it out of its current stupor.

Whatever the trigger might be, investors should stay on the alert, so they will not miss out on the many buying opportunities presented by today's battered penny stocks and bruised blue chips.

engyeow@sph.com.sg