The FBM KLCI eased to a two-week intraday low of 1,543.5 points on Tuesday amidst declines in offshore markets. However, buying support of selected blue chips helped the FBM KLCI to close at 1,563.43 points and register a gain of 0.5% for the week.

Average daily trading volume was sustained at 0.8bil over the week while daily turnover in value terms increased to RM1.6bil from RM1.4bil in the preceding week.

Regional markets closed on a weaker note on concerns that Greece may default on its sovereign debt, which could lead to an increase in volatility of global financial markets. The Hong Kong market registered a weekly loss of 3.2% to close at a 9-month low of 21,695 points.

On Wall Street, shares prices closed on a firmer note as investor sentiment was supported by the better-than-expected housing starts in May. The Dow inched up 0.4% to close at 12,004 points while the broader-based S&P 500 Index closed almost unchanged at 1,271.5 points. However, the Nasdaq was down 1.0% to 2,616 points on losses in selected tech stocks over the same period.

In the U.S., macroeconomic data released over the week were mixed with consumer spending strengthening as retail sales grew by 7.7% in May from 7.3% in April on higher vehicle and gasoline store sales. Housing starts rose by 3.5% month-on-month to a seasonally-adjusted annual rate of 560,000 units in May after declining by 8.8% in April due to higher construction activities in certain regions. However, the inflation rate rose to a 31-month high of 3.6% in May from 3.2% in April on higher transportation costs while the core inflation rate increased to 1.5% from 1.3% over the same period.

Following news of an increase in the U.S. government’s oil inventory, oil prices registered a weekly loss of 6.3% to close ata 4-month low of US$93.01/brl.

On the regional front, China’s inflation rate rose to a 34-month high of 5.5% in May from 5.3% in April amidst higher food costs. To contain inflation, the Chinese central bank raised the reserve requirement ratio by 50 basis points to 21.5% for commercial banks effective from 20 June 2011.

On the local front, in view of a decline of 2.2% in April’s industrial output, slower pace of global economic growth due to elevated energy prices and Japan’s global supply chain disruption, the full year forecast for Malaysia’s GDP growth is revised down to 5.2% from 5.5% previously.

On a weekly basis, the Ringgit remained firm against the US$ to close at RM3.029 while on a-year-to-date basis the Ringgit strengthened by 1.0% against the greenback.

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

At the KLCI’s closing level of 1,563.43 points on 17th June 2011, the local stock market is trading at a prospective P/E of 16.3x on 2011 earnings, which is comparable to the market’s 10-year average P/E ratio of 16.7x. The local market is supported by a gross dividend yield of about 4.0%, which is higher than the 10-year average of 3.6% and exceeds the 12-month fixed deposit rate of 3.15%.