Sunday, April 1, 2012

WEEKLY HIGHLIGHTS


WEEKLY HIGHLIGHTS
• The FBM KLCI rose to a 2-week intraday high of 1,587.1 points on Friday before closing at 1,585.8 points to register a gain of 0.9% for the week.
• Regional markets generally closed lower following weak economic data from Europe.
• Looking ahead, the performance of the local and regional markets will depend on improvement in U.S. economic activities and developments in the Eurozone.
STOCKMARKET COMMENTARY
The local market bucked regional markets with gains throughout the week on buying of lower liners and selected index stocks. After touching a two-week intraday high of 1,587.1 points on Friday, the FBM KLCI subsequently closed at 1,585.8 points to register a gain of 0.9% for the week. Average daily trading volume increased to 2.5bil from 1.5bil in the preceding week while daily turnover in value terms eased to RM1.6bil from RM1.7bil over the same period.
Regional markets generally closed lower as investors turned more cautious about economic activities in Europe and China.
The China ‘H’ shares and Hong Kong markets fell by 5% and 3% respectively for the week. However, ASEAN markets fared better with the Thailand and Indonesia markets remaining well-supported.
On Wall Street, the Dow moved in a tight trading range and remained above 13,000 points. Lacklustre economic news from Europe subsequently caused sentiment to weaken with the Dow registering a weekly
loss of 1.1% to close at 13,080.7 points. The broader-based S&P 500 index was 0.5% lower at 1,397.1 points over the week.
The Nasdaq edged up by 0.4% to 3,067.9 points over the same period.
In the U.S., housing starts were sustained at 698,000 units in February compared to a 39-month high of 706,000 units in January. However, existing home sales declined by 0.9% on a month-on-month basis to a seasonally adjusted annual rate of 4.59mil units in February from 4.63mil units in January. The new home sales declined by 1.6% month-on-month to a seasonally adjusted annual rate of 313,000 units from
318,000 units over the same period.
For the second straight month, the Eurozone’s PMI Composite Output Index remained below 50 with a month-on-month decline of 1.2% to 48.7 in March from 49.3 in February, signalling that Eurozone’s
GDP may continue to decline. Crude oil prices eased to US$106.47/brl to register a weekly loss of 0.6% following an increase in U.S. oil inventories. On the regional front, inflation rates in Singapore and Hong Kong eased to 4.6% and 4.7% respectively in February from 4.8% and 6.1% respectively in January
amid lower food prices.
On the local front, Malaysia’s inflation rate eased to a 14-month low of 2.2% in February from 2.7% in January due to lower food & beverage prices. Food & beverage prices eased to 2.9% from 4.8% over the
same period due mainly to the high base effect of the same period in 2011. Malaysia’s foreign reserves were maintained at RM427bil as at 15 March 2012 on account of sustained capital inflows and positive trade balance. On a weekly basis, the Ringgit weakened by 0.9% to close at RM3.077 against the US$ while on a year-to-date basis, the Ringgit appreciated by 2.9% against the greenback.
Looking ahead, the local market is anticipated to move in tandem with overseas markets as investors continue to monitor U.S. economic activities and developments in the Eurozone.
At the FBM KLCI’s closing level of 1,585.8 points on 23rd March 2012, the local stock market is trading at a prospective P/E of 15.8x on 2012 earnings, which is lower than its 10-year average P/E ratio of 16.7x. The local market is supported by a gross dividend yield of about 4.1% which exceeds the 12-month fixed deposit rate of 3.15%. Other Markets’ Performance 23 Mar'12 16 Mar'12 % Weekly
Dow Jones 13,081 13,233 -1.1 Nasdaq 3,068 3,055 +0.4 TOPIX 853 867 -1.6 SH Comp 2,350 2,405 -2.3 China*, H share 10,658 11,216 -5.0 MSCI China 5,920 6,162 -3.9 Hong Kong 20,669 21,318 -3.0
Taiwan 8,077 8,055 +0.3 South Korea 2,027 2,034 -0.4 Singapore 2,990 3,011 -0.7 Thailand 1,194 1,190 +0.4 Indonesia 4,042^ 4,029 +0.3 * Hang Seng China Enterprises Index ^ Index as at 22 Mar`12
Bursa Securities Market Valuations^ 23 Mar'12 16 Mar'12 10 yr av.*
FBM KLCI 1,585.83 1,571.40 - PER'12 (x) 15.79 15.64 16.67 Price/NTA(x) 5.14 5.15 2.79
3mth InterBk 3.19% 3.19% 3.12% 12mth FD, % 3.15% 3.15% - *2002-2011 average
^PMB In-House Statistics Malaysia’s Economic Snapshot 2010 2011 2012F GDP growth, % 7.2 5.1 4.5
Inflation, % 1.7 3.2 2.7
F=forecast
Bursa Securities 10 year P/E Ratio 10 15 20  25 30 01 02 03 04 05 06 07 08 09 10 11 12 P/E Ratio (x) Average: 16.7x 23 Mar'12 P/E on 2012 earnings: 15.8x

BOND MARKET COMMENTARY
For the fortnight ended 23rd March 2012, the U.S. Treasury market weakened as investors
shifted to higher-yielding assets on account of the improving outlook for the U.S. economy. The 3, 5 and 10-year Treasury yields rose by between 10 basis points (bps) and 20 bps to 0.54%, 1.08% and 2.23%
respectively over the fortnight.
The Malaysian Government Securities (MGS) market weakened on profit taking.
The weakening of the Ringgit also dampened sentiment. The 3, 5 and 10-year MGS yields
rose by between 7 bps and 13 bps to 3.07%, 3.29% and 3.61% respectively over the fortnight.
The local corporate bond market weakened in line with the MGS as the 3, 5 and 10-year
AAA corporate bond yields rose by between 7 bps and 9 bps to 3.70%, 3.95% and 4.36%
respectively over the fortnight. In the money market, the spread of the 3- month Kuala Lumpur Interbank Offer Rate (KLIBOR) over the yield of the 3-month U.S. Treasury bill rose to 312 bps from 311
bps over the fortnight ago as the 3-month U.S. Treasury bill fell by 1 basis point to 0.07% while the 3-month KLIBOR remained unchanged at 3.19% over the same period.
Looking ahead, the U.S. Treasury bond market is expected to remain well-supported in the medium term due to the sluggish outlook for the global economy.
On the domestic front, the MGS market is expected to remain supported amid uncertainty over the economic growth in the medium-term.                                                                                                                                                              

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