MARKET players are expecting activity on the local bourse to follow the dreary tone set in the past few weeks.

The lack of conviction in the market stems from the troubling inflationary pressures fuelled by record oil prices and Wall Street’s fall last Friday. There is not likely to be much uplifting news coming in either.

‘You know the saying: Sell in May and go away? Every month this year seems to be a May. It’s that bad,’ said a remisier.

‘It’s very stressful for us as well. Once you buy, you’re stuck. There’s not much to be made. We don’t want to see clients lose money.’

Another dealer expects more selling in the next one to two weeks.

One reason for the four straight days of losses suffered last week by The Straits Times Index (STI) might be that the market was compensating for having discounted at first the severity of the problems.

In the past few weeks, many analysts have cautioned investors against concluding over-optimistically that the credit crunch has ended. They also say the risks of a full-blown recession in the United States are growing by the day, because of the deepening housing crisis there and higher oil prices.

These concerns were largely shrugged off by the equity markets - until last week.

The STI’s recovery from its March lows, as well as recent recoveries in global stock markets, are ‘premised on the belief that the US financial system has stabilised after bold moves to restore liquidity’, said CIMB-GK research head Kenneth Ng in a report last week.

‘The euphoric moves in global equity prices and credit market spreads could be premature. We believe that a balanced strategy is warranted.’

CIMB-GK has lowered its earnings-per-share growth expectations for the STI to 7.1 per cent, down from 13 per cent, after weighing the impact of higher oil prices, slower profit recognition and deferred launches for property stocks, as well as increased competition for telecommunications companies.

The steady onslaught of grim financial news, coupled with more than 65,000 job layoffs worldwide since August last year, has already exacted a heavy toll on markets.

The mood has been soured further by Citigroup slashing its profit forecasts for Goldman Sachs and other institutions in view of lower trading and underwriting fees.

The market is also suffering from a drought in initial public offerings (IPOs), which is another sign of battered sentiment.

So far this year, IPO proceeds raised in the Singapore market have totalled only US$53.1 million (S$72.6 million), down 95 per cent from the same period last year, when a total of US$1.065 billion was raised, according to data compiled by Thomson Financial.

But it expects sentiment to recover and the Singapore market to chalk up a total of US$4.5 billion worth of deals over the remainder of the year - a rather optimistic scenario.

In the meantime, as prominent business leaders and analysts continue to debate the gravity of the world’s current financial woes, just beware that any bounce in equities might be nothing more than a classic bear market rally.