Buying interest in selected blue-chip stocks and the rebound in certain regional markets helped the KLCI to touch a 1-week intraday high of 1,153.3 points on Friday before closing at 1,150.4 points to register a gain of 1.4% for the week.
Average daily trading volume was sustained at 0.4 billion units over the week while average trading value decreased to RM0.9 billion from RM1.1 billion in the preceding week.
On Wall Street, the Dow fell to a 2-year low of 11,086 points on Thursday following concerns over the financial health of Freddie Mac and Fannie Mae, which are mortgage institutions that hold or guarantee about $5 trillion worth of mortgages in the U.S. However, the sell-down was mitigated by the Federal Reserve’s chairman Ben Bernanke’s comments that the Fed will offer lending assistance by opening up the discount window to these two mortgage firms. The Dow closed at 11,101 points to register a decline of 1.7% for the week. The Nasdaq fell by 0.3% at 2,239 points over the same period.
Export growth in the U.S. sustained at 17.8% in May from 19.2% in April on moderation in exports of capital goods and food & beverages. Meanwhile import growth eased to 12.5% from 13.6% over the same period. As export growth outpaced import growth, the cumulative trade deficit for the first five months of 2008 narrowed by 1.3% to US$295.2 billion over the previous corresponding period.
The University of Michigan Confidence Index rose to 56.6 in July from 56.4 in June as consumers’ perception on current economic conditions was sustained.
Crude oil prices touched an intra-day record high of US$146.30/brl on Friday due to geopolitical concerns in the Middle-East and supply disruptions in Brazil and Nigeria before easing on expectations of lower U.S. oil consumption to close at US$145.08/brl and register a weekly decline of 0.1%.
On the local front, industrial production growth fell to 2.5% in May from 4.8% in April due to lower manufacturing and mining output. Malaysia’s foreign reserves rose by RM12.8bil in the last two weeks of June to RM410.9bil as at 30th June 2008 compared to a decline of RM0.2bil in the first two weeks of June 2008. The increase in reserves was due to the quarterly adjustment of foreign exchange revaluation gain as major currencies strengthened against the Ringgit in 2Q2008.
The Ringgit registered a weekly gain of 1.1% against the U.S. dollar to close at RM3.233 as the U.S. dollar weakened against major currencies. On a year-to-date basis, the Ringgit appreciated by 2.3% against the greenback.
Looking ahead, the local market is anticipated to continue moving in tandem with overseas markets over the near term. Investors will continue to monitor the outlook for oil prices, economic growth and interest rates in the U.S.
At the KLCI’s closing level of 1,150.4 points on 11th July 2008, the local stock market is valued at a P/E of 13.8x on 2008 earnings which is at a discount of 18.3% to its 8-year average of 16.9x. The market is also supported by a gross dividend yield of 5.1% which compares favourably to Ringgit fixed deposit rates for tenures of less than one year.
