MANILA, Philippines ? (UPDATE) Local stocks promptly bounced back on Wednesday as bargain-hunting on selective blue chips diminished jitters caused by a bloody hostage-taking incident in Manila.

The main-share Philippine Stock Exchange index gained 23.65 points or 0.67 percent to close at 3,554.15, ignoring an overnight bloodbath in Wall Street.

This was on the back of a strong rebound by Ayala Land Inc. and Manila Electric Co. which were heavily dumped in the last minute of the previous session, but which many dealers said may have been precipitated by a trading error.

But without the sharp rebound by ALI and Meralco, overall sentiment was still weak, given the weak risk appetite in overseas markets.

Although the market has yet to fully recover from Tuesday's heavy profit-taking that pulled down the PSEi by 2.3 percent, bargain-hunters have started to come to the rescue.

ALI gained by 15.6 percent to P16.8 per share after falling by nearly the same magnitude on Tuesday. Meralco likewise gained by close to 3 percent to P176 per share.

Trading was mixed across sectors, with the property sector surging by a hefty 5.5 percent on the back of ALI's recovery. The industrial sector likewise firmed up.

On the other hand, the mining/oil and holding firms continued to take a beating as their respective indices fell by 2.65 percent and 1.6 percent, respectively. The financial sector was likewise down by 0.69 percent.

Despite the rebound, decliners overwhelmed advancers 96 to 38 while 33 stocks were unchanged. About P4.4 billion worth of shares were traded in the market.

Aside from ALI, investors picked up shares of Philippine Long Distance Telephone Co., Banco de Oro Unibank Inc., Energy Development Corp. and First Philippine Holdings Corp., helping the market firm up after Tuesday's staggering losses.

On the other hand, the following stocks traded on the red: SM Investments Corp., Metropolitan Bank & Trust Co., Megaworld Corp., Universal Robina Corp., Filinvest Land Inc., Ayala Corp., Alliance Global Group Inc., Metro Pacific Investments Corp., Bank of the Philippine Islands, Aboitiz Power Corp., SM Prime Holdings Inc., Security Bank Corp., DMCI Holdings Inc., Philippine National Bank
and Semirara Mining Corp.

Overnight, the Dow Jones Industrial Index was down by 133.96 points or 1.32 percent to 10,040.45. The broader S&P 500 index was flat while the tech-heavy Nasdaq was down by 1.66 percent.

Risk aversion remains high in overseas markets as double-dip recession fears intensified following reports of weak US home sales in July.