Led by gains in selected index stocks, the FBM KLCI crossed 1,500 points on Wednesday. The FBM KLCI closed at a 33-month high of 1,505.7 points to register a gain of 1% for the week.

The average daily trading volume decreased to 1.2 bil units from 1.4 bil units in the previous week while average trading value eased to RM1.8 bil from RM1.9 bil over the same preceding period.

On Wall Street, share prices moved in a trading range as investors stayed in the sidelines ahead of the results of the U.S. mid-term elections and the Federal Open Market Committee (FOMC) meeting on 3rd November. The Dow fell by 0.1% to close at 11,119 points while the Nasdaq rose by a 1.1% to close at 2,507 points over the week.

In the U.S., economic activities was sustained with the 3Q2010 GDP growth sustaining at 3.1% compared to 3% in 2Q2010 on the back of resilient consumer spending, which rose to 1.9% from 1.7% over the same period. For first three quarters of 2010, GDP grew by 2.8% compared to a 2.6% decline in 2009. Meanwhile, consumer sentiment, as measured by the Conference Board consumer confidence index, rose to 50.2 from 48.6 over the same period on better economic outlook. U.S. existing home sales rose for the second consecutive month by 10% month-on-month to a seasonally-adjusted annual rate of 4.53 million units in September from 7.3% month-on-month in August following the extension of the government’s tax credit for first-home buyers up to September 2010.

Oil prices registered a weekly gain of 0.3% to close at US$81.43/brl following a decline in U.S. oil inventories.

On the domestic front, Malaysia’s money supply (M3) growth rose to 8.5% in September from 8.2% in August on the back of higher growth in savings and fixed deposits. Meanwhile, loans growth was sustained at 11.9% in September compared to 11.7% over the same period on resilient growth of real estate and financial services sector loans.

The Ringgit closed at RM3.102 to register a weekly gain of 0.3%. On a year-to-date basis, the Ringgit appreciated by 10.9% against the greenback.

Looking ahead, the local market is anticipated to continue moving in tandem with overseas markets as investors continue to monitor the recovery of global economic activities and the normalisation of interest rates.

As at 29th October 2010, the local stock market is valued at a P/E of about 16.2x on 2011 earnings, which is comparable to its 10-year average P/E ratio of 16.7x. The local market is also supported by a gross dividend yield of 3.5%, which is lower than the 10-year average of 3.8% but exceeds the 12-month fixed deposit rate of 2.85%.