After starting the week on a firm note, the FBM KLCI eased to an intraday low of 1,487.2 points on Thursday amidst weaker regional markets. However, selective bargain-hunting on Friday helped the FBM KLCI to close at 1,506.0 points to register an increase of 0.4% for the week.

Average daily trading volume decreased to 1,172 mil from 1,697 mil units in the preceding week while daily turnover in value terms fell to RM1,579 mil from RM2,384 mil over the same period.

Regional markets continued to ease on concerns over Ireland’s debt crisis and further tightening of China’s monetary policy. The China ‘H’ shares market registered a weekly loss of 3.6%. However, the Japan market rose by 2.7% as the Yen’s weakness against the Euro enhanced the competitiveness of Japan’s export-based stocks.

On Wall Street, share prices were well-supported as sentiment was lifted by the successful relisting of General Motors. The Dow closed slightly higher at 11,204 points to register a weekly gain of 0.1% while the Nasdaq was unchanged at 2,518 points over the same period.

In the U.S., consumer spending continued to improve with retail sales growth rising to 1.2% month-on-month in October from 0.7% in September amidst improving job prospects. The inflation rate inched up to 1.2% year-on-year in October from 1.1% in September on higher transportation costs. However, the core inflation rate moderated to 0.6% from 0.8% over the same period. Housing starts fell for the second consecutive month by 11.7% month-on-month to a seasonally adjusted annual rate of 519,000 units in October after declining by 4.2% in September.

Crude oil prices registered a loss of 4% over the week to close at US$81.51/brl following an increase in U.S. oil inventories.

On the regional front, the People’s Bank of China raised the reserve requirement ratio (RRR) for the second time in November by 50 basis points to a 23-year high of 18.5% for the six largest banks to curb excess liquidity and credit growth. The RRR was also raised by 50 basis points to 16% for smaller banks effective from 29th November 2010.

In South Korea, the Bank of Korea raised its policy rate for the second time this year by 25 basis points to 2.50% on 16 November 2010 to curb inflationary pressures.

On the local front, Malaysia’s foreign reserves fell by 1.5% on a year-to-date basis to RM326.5 billion as at 15th November 2010 due to the appreciation of the Ringgit against major currencies.

On a weekly basis, the Ringgit weakened by 0.2% against the US$ to close at RM3.122 while on a year-to-date basis, the Ringgit appreciated by 10.3% against the greenback.

Looking ahead, the local market is anticipated to move in tandem with overseas markets. Investors will continue to monitor the outlook for the U.S. and global economic activities.

At the KLCI’s closing level of 1,506.0 points on 19th November 2010, the local stock market is trading at a prospective P/E of 16.2x on 2011 earnings, which is 3% below the market’s 10-year average P/E ratio of 16.7x. The local market is supported by a gross dividend yield of about 3.5%, which exceeds the 10-year average of 3.4% and the current 12-month fixed deposit rate of 2.85%.