STI's window-dressing gains wiped out

NEWS reports attributed Wall Street's Thursday blowout to Argentina defaulting on its bond payments, but, just like attributing OCBC's jump mid-week to its takeover of Wing Hang Bank, this made little sense, since Argentina's debt problems have been known about for months. Its default was thus not a surprise; inefficient though capital markets may be, it is inconceivable that they could be that inefficient.

Similarly, attributing OCBC's gains on Wednesday and Thursday to news that it has gained full control of Wing Hang and will delist it fails to take into consideration the fact that the market had shunned its shares for the months since the announcement of the Wing Hang deal, on the grounds that the bank would have to raise a massive amount of capital to foot the bill.

In the case of Wall Street, the Dow Jones Industrial Average's 2 per cent or 317-point slide to 16,563 on Thursday was probably not so much due to Argentina's debt problems, but more to the market there shifting back to the "good-economic-news-is-bad-for-stocks" mode, which has been in force for much of the past five years.