The FBM KLCI fell to a 5-week intraday low of 1,505.4 points on Wednesday amidst profit-taking activities. Sentiment was also dampened by sluggish trading conditions in offshore markets. The FBM KLCI subsequently closed at 1,521.9 points to register a loss of 1.7% for the week.

Average daily trading volume decreased to 1.6 bil from 1.8 bil units in the preceding week while daily turnover in value terms eased to RM2.3 bil from RM2.4 bil over the same period.

Selected regional markets generally closed on a mixed note following news of higher-than-expected inflationary pressures.

On Wall Street, share prices were range-bound as domestic merger & acquisitions news was mitigated by concerns over Europe’s debt crisis. The Dow eased by 0.4% to close at 11,824 points for the week. The Nasdaq edged down by 0.1% to close at 2,687 points over the same period.

In the U.S., GDP growth for 4Q2010 rose to 3.2% on an annualised quarter-on-quarter basis from 2.6% in 3Q2010 due to stronger growth of consumer spending and exports. On the housing front, new home sales surged to 17.5% on a month-on-month basis to 329,000 units in December after remaining flat in November as housing demand increased. U.S. consumer confidence, as measured by the Conference Board Index rose to an 8-month high of 60.6 in January 2011 from 53.3 in December 2010 due to improving domestic economic activities.

Oil prices closed at a one-week high of US$89.34/brl to register a weekly gain of 1.6% on concerns that the political unrest in Egypt may spread to crude oil producing countries in the Middle East.

On the local front, loans growth moderated to 12.8% in December from 13.2% in November due to lower household and corporate loans. Meanwhile, Bank Negara Malaysia maintained the overnight policy rate at 2.75% at its meeting on 27th January 2011 as it deemed the current monetary policy stance as appropriate and consistent with its current assessment of the economic growth and inflation prospects.

On a weekly basis, the Ringgit remained firm against the US$ to close at RM3.059 while on a year-to date basis, the Ringgit remained unchanged against the greenback.

Looking ahead, the local market is anticipated to remain supported by resilient economic growth, low real interest rates and healthy corporate earnings growth. However, investors will continue to monitor the outlook for the U.S. and global economic activities.

At the KLCI’s closing level of 1,521.9 points on 28th January 2011, the local stock market is trading at a prospective P/E of 15.9x on 2011 earnings, which is lower than the market’s 10-year average P/E ratio of 16.7x. The local market is supported by a gross dividend yield of about 3.4%, which is below the 10-year average of 3.6% but exceeds the 12-month fixed deposit rate of 2.85%.