By Goh Eng Yeow, Senior Correspondent

THE near-miraculous stock market recovery since March might have eased some of the pain but most traders will happily say good riddance to this 'lost decade'.

As Nobel Prize winning economist Paul Krugman noted, it was an era best forgotten in which nothing good happened and none of the optimistic things people were supposed to believe in came true.

While his observation certainly applies to his native US stock market - the Dow Jones was down 9.3 per cent over the decade - at first glance, it seems to hold true for our bourse too.

If an investor sank $10,000 into a fund mirroring the benchmark Straits Times Index (STI) on Jan 3, 2000, his returns would have been a paltry 1 per cent a year, excluding any dividends.

Yet while the STI's overall returns for the decade were meagre, local corporate giants did not suffer the malaise that hobbled peers elsewhere, as they expanded their businesses by leaps and bounds.

And if they match that progress over the next 10 years, there is a chance that some local champions will be as venerated as the IBMs of this world.

But to see where blue chip firms might go, it is useful first to see how they got to this point after a decade that has left investors in varying states of delight, delusion and despair.

It all started off well enough when Singapore and the rest of the region emerged from the Asian financial crisis to reap the intoxicating - if fleeting - rewards of the dot.com craze.

Now-neglected counters such as i-One.Net - since renamed as Xpress Holdings - were among the market darlings, as they dazzled investors with their bold business plans.

Even banking giants like DBS Group Holdings traded like there was perpetual sunshine, becoming linked with every lender up for sale in the region.

But a nasty recession in the United States brought the curtain down on the millennium bull run.

The dot.com bubble burst with a vengeance, causing the STI to fall for three straight years between 2000 and 2002.

Yet, it was during this bleak period of gloom and doom that the bosses of local blue chips planted the seeds for expansion that have since reaped a bountiful harvest.

Take bank consolidation, which reduced the number of local lenders from five to three.

OCBC swallowed up Keppel TatLee Bank while Overseas Union Bank disappeared into United Overseas Bank (UOB), both in 2001. That same year, DBS expanded its regional footprint by taking over Dao Heng Bank in Hong Kong.

Overseas lending now accounts for more than 40 per cent of DBS' and OCBC's loan books and one-third of UOB's - a testimony to their efforts in the past decade to regionalise their operations.

The consolidation turned them into some of the strongest financial institutions in the world, allowing them to avoid the calamities that have bedevilled - and in some cases killed - other banks during the financial crisis of the past two years.

The combined market value of DBS, OCBC and UOB now exceeds that of US banking giant Citigroup.

In terms of share price, OCBC was the best performer among local banks, gaining 65 per cent over the past 10 years, followed by UOB, which rose 44 per cent.

But the financial sector was not the only industry to feel the winds of change sweeping across the globe.

Telco giant SingTel became a regional powerhouse after taking over mobile operator Optus in Australia and growing a range of lucrative overseas investments such as Bharti in India and Telkomsel in Indonesia.

In the manufacturing sector, market darlings such as NatSteel Electronics, Omni Industries and JIT were swallowed up by huge US technological giants, while stand-alone Venture Corporation bulked up by taking over GES International.

Shipyards - once shunned as a sunset industry - staged a stunning comeback, with Keppel Corporation and SembCorp Marine transforming themselves into the world's leading rig-builders on the back of intensified offshore oil exploration during the decade.

Even developers got into the action, with property giants such as CapitaLand and City Developments building far-flung real-estate empires as they expanded their retail and hotel operations overseas.

Investors who were lucky - or canny - enough to get into these local blue chips have enjoyed bumper returns.

An investment of $1,100 in 1,000 Singapore Exchange shares when the bourse listed in November 2000 has grown to $8,330 now - and that is excluding dividends over the years.

SembCorp Marine also reaped huge returns for investors as its shares jumped 6.7 times over the past 10 years.

Local property developer CapitaLand - the result of a merger between DBS Land and Pidemco in 2000 - rose 84 per cent while Fraser & Neave surged 2.47 times.

Of course, the new decade will toss up fresh challenges for the local behemoths, which are still relatively small in global terms, despite their vast expansion over the past 10 years.

They may have to re-invent their business models to cope with the competition from fast-rising regional rivals moving up the value chain. They will also have to cope with uncertainties triggered by the gradual erosion of the US dollar as the international currency for commerce.

But there will still be plenty of business opportunities to capitalise on as emerging economic superpowers like China wrestle with the West for supremacy.

For investors, the trend of the stock market is pretty clear.

Stocks may be volatile in the short term. Booms and busts will become more frequent with the likely increase in turmoil as the world's centre of gravity shifts from West to East.

So while the last 10 years may have been a slog, let's toast the next 10 and note that if you have staying power, bountiful returns may well await. Happy New Year.

Cai Jin runs every Monday and covers financial matters and corporate governance issues that can affect investors. The two Chinese characters marry wealth with good fortune - the two crucial factors that any investor needs to prosper.

This article was first published in The Straits Times.