UNTIL recently, there was euphoria in the stock market reminiscent of last year's super-bull run.
Blue chips such as DBS Group Holdings, United Overseas Bank and the Singapore Exchange enjoyed sharp run-ups, as investors bet on a V-shaped recovery in stock prices across the globe.
Last week, however, the mood began to sour. For lack of a better reason on which to pin their misgivings, investors blamed escalating inflation and soaring oil prices for the jitters that had started creeping in.
Also singularly lacking were the positive signals investors had been hoping to get from the current corporate reporting season.
The insurance giant American International Group, for example, posted a record loss of US$7.8 billion (S$10.7 billion) for the quarter because of the collapse in the value of securities tied to the crisis-hit United States mortgage market.
This dispelled a widely-held belief among investors that the worst of the credit crisis was over for global financial markets, after the Federal Reserve made a dramatic effort to bail out ailing investment bank Bear Stearns in March.
On the local front, banks distinguished themselves by registering sharp falls in prices during the week, despite posting better-than-expected first-quarter results.
Still, the angst among investors is understandable.
While local banks may be flush with liquidity, unlike their global counterparts, which are scrambling to raise fresh capital, their outlook may be less clear.
After a sunny first quarter, when blizzards from the global financial storm hardly touched Singapore's shores, few are expecting the local economy to escape the backlash from a weakening in US consumer demand.
This may cause banks' profitability to slow, as loan growth drops.
And soaring oil prices bring their own set of problems.
After a Goldman Sachs analyst predicted that each barrel of oil may fetch an eye-popping US$200 in the next two years, market strategists rushed to examine the impact such a development would have on the global economy.
For investors, it meant a wholesale switching out of transport stocks across the region.
Even quality carriers such as Singapore Airlines could not escape the onslaught, as the stock sank 3.8 per cent to $15.54 last week.
So, it is not surprising that after gaining 310 points, or 10.6 per cent, in the past two months, the benchmark Straits Times Index slipped 74.07 points, or 2.3 per cent, last week to 3,162.03.
Stock pundits noted, however, that the rapid recovery in share prices since March did have one benefit.
It at least put to rest earlier fears that stock markets would be stuck in an L-
shaped limbo, as one financial crisis after another on Wall Street threatened to pull down the global financial system.
And the debate now is whether stock markets will experience a U-shaped or a W-shaped recovery.
At this point, it is useful to take some pointers from top bankers with their pulse on Singapore's economy.
Unlike the glum mood encountered at another bank in February, with its chief executive (CEO) describing this year as a challenging one, the atmosphere at OCBC Bank's first-quarter results press conference last week was a lot more relaxed and cheerful.
While CEO David Conner took pains to repeat several times that the bank was on the alert for a further deterioration in the global economy, those present came away with the impression that there were abundant business opportunities.
Yes, the US economy will probably suffer for a few more quarters, but there are sectors in Singapore that will continue to thrive.
The construction and building materials sector will benefit from mega investments as ExxonMobil, for instance, presses ahead with its US$4 billion (S$5.48 billion) petrochemical plant.
There may even be something to cheer about in the moribund residential property market.
Mr Conner sniffed opportunities in lending to buyers who had purchased on deferred payment terms, reckoning that they would pick up their purchases because rental demand was so strong.
So, like OCBC, stock investors will have to sniff out buying opportunities in sectors that will continue to do well in the current uncertain economic climate.
While the super-bull run of yesteryear may not return any time soon, that does not mean that share prices will languish at current levels.
Indeed, for some sectors, the going will be very balmy, even though there may be an overcast sky elsewhere.
The mood has begun to sour since a recent euphoric rise in the stock market as rising inflation and soaring oil prices again stoke concerns among investors.
Corporate reports, meanwhile, have been lacking in positive signals.
LThe construction and building materials sector will benefit from investments like ExxonMobil's US$4 billion (S$5.48 billion) petrochemical plant.
Lending to buyers on deferred payment terms also presents opportunities.
