Led by buying of selected index stocks following higher regional markets, the FBM KLCI crossed above 1,500 points to hit a 3-week intraday high of 1,529.4 points. The index closed at 1,522.6 points to register a gain of 2.2% for the week.

Average daily trading volume increased to 1.9 bil from 1.7 bil units in the preceding week while daily turnover in value terms fell to RM1.7 bil from RM2.1 bil over the same period.

On Wall Street, shares prices were well-supported following news of continued improvement in the labour market, reinforcing expectations that the economic recovery is gaining pace. The Dow rose by 0.3% to close at 12,170 points for the week. The broader-based S&P 500 Index was almost unchanged at 1,321 points while the Nasdaq was up by 0.1% to 2,785 points over the same period.

In the U.S., manufacturing activities strengthened with the Institute of Supply Management Purchasing Managers’ Index rising to a 6½-year high of 61.4 in February from 60.8 in January on higher production and new orders. U.S. non-farm jobs rose by 192,000 jobs in February compared to an increase of 63,000 jobs in January due to higher job gains in the services and construction sectors. The unemployment rate fell to a 22-month low of 8.9% from 9% over the same period.

Due to continued concerns over the political uncertainties in the Middle East, oil prices closed at a 2½-year high of US$104.42/brl to register a weekly gain of 7.7%.

On the domestic front, Malaysia’s export growth moderated to 3% in January 2011 from 4.6% in December 2010 on lower electronic exports. Meanwhile, import growth rose to 13.5% from 11.5% over the same period. As imports outpaced exports, Malaysia’s trade surplus for January 2011 narrowed by 28.9% to RM9.2 billion compared to the previous corresponding period.

On a weekly basis, the Ringgit rose by 0.7% against the US$ to close at a 2-week high of RM3.029 while on a year-to-date basis, the Ringgit appreciated by 1.0% 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.

As at 4th March 2011, the local stock market is valued at a P/E of about 16.0x 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 3.4%, which is below the 10-year average of 3.6% but exceeds the 12-month fixed deposit rate of 2.85%.