The bears in the region were primed to pounce after the Dow Jones Industrial Average sank 239 points, or 2.1 per cent, on fresh fears of more bank-sector credit losses and a flight to safer securities.

Back home, the Straits Times Index lost ground for a fourth straight session, shedding 23.8 points to 2,886.56. Trading was still thin at 954.85 million shares, but it was better than Monday's paltry 748.9 million shares, the thinnest volume since last Christmas Eve's half-day of trade.

'The rout here would have been worse had the short sellers not covered their positions later in the day,' said a local dealer yesterday. Short sellers are investors who sell stocks they do not own in the hope of buying them back later in the day at a lower price in order to pocket a profit.

Other regional bourses fared far worse. Japan's Nikkei 225 retreated 1.5 per cent, while Hong Kong's Hang Seng Index lost 1.9 per cent.

Taiwan suffered a severe mauling with stocks slumping 3 per cent, Australian stocks slid 1.5 per cent, while South Korean shares shed 2 per cent.

'Equity markets are capitulating on expectations of a deepening of the global banking crisis,' said Nomura's chief Asia strategist Sean Darby. The Hong Kong-based analyst added: 'Asian and emerging markets are experiencing capitulation due to risk aversion.'

Here, property and bank stocks led the decline. CapitaLand dropped another 17 cents to $5.66 after sliding eight cents on Tuesday, the biggest drag on the STI.

CLSA analyst Wong Yew Kiang said the property market's four-year rally 'could come into a strong moderation in the next 12 months'. He told Bloomberg TV that prices for luxury homes could drop as much as 15 per cent this year from last year, while mass-market housing prices would grow by about 5 per cent.

alfoo@sph.com.sg