The FBM KLCI slipped further into the negative territory for the second straight session. However, as Wall Street charged higher prior to the US Fed interest rate decision next week, investors could be anticipating a less-hawkish tone by the US Fed after a cooling labour market data. Also, we have noticed the Hang Seng Futures have turned more positive, breaking above the SMA200 zone, that positive sentiment could spillover towards stocks on the local front and pushing the FBMKLCI higher in the near term.

Selling interest continued in the FBM KLCI with anticipation over the slower economic recovery in China in view of its higher-than-expected decline in export data for the period of May 2023. Hence, the concerns over the global economic recovery, coupled with a few key economic data that will be released next week such as the US CPI may keep investors in a cautious mode. Nevertheless, we still expect the current level of FBM KLCI may attract bargain hunting activities from investors as values could be emerging.

Bermaz Auto Bhd (BAUTO) is principally involved in the distribution and provision of after-sales services and spare parts of 3 internationally renowned marques in Malaysia namely, Mazda, Peugeot and Kia and also the distributor of Mazda marque in the Philippines. AS of end-FY22, BAUTO has approximately 150 branches nationwide that are supported by more than 800 employees and have delivered more than 14,600 vehicles.

Slow recovery in occupancy towards pre-pandemic level. Portfolio occupancy rate stood at 80.7% as at 1Q23. We expect a slow and gradual recovery in the portfolio occupancy rate towards the pre-pandemic level (91.5% in FY19) amidst widening supply-demand gap of office space as more organisations continued to re-evaluate their workplace strategies even after WHO has declared that Covid-19 has ended.

The FBM KLCI bounced from losses to end on a positive note as bargain hunting activities emerged in the final trading hour on selected plantation and Petronas related heavyweights. Meanwhile, on Wall Street, both the S&P 500 and Nasdaq are still positive biased, charging towards their respective year-to-date highs, we believe the positive sentiment may spill over to the local bourse. Nevertheless, investors may remain on the sidelines, while awaiting the US Fed interest rate decision next week.

Improved margins. SCOMNET chalked in net margins at 18.8% in 1QFY23 vs. 16.3% recorded in 4QFY22. The said improvement came due to better sales of higher profit margin products that mitigated the higher operational expenses from the rising minimum wages and higher electricity tariff (that is expected to result in c.RM800,000 of additional expenses in each quarter). We reckon that margins to stay hit c.20% level in coming quarters, owing to the stronger orders in higher margins products. Meanwhile, SCOMNET continues to operate in a healthy balance sheet with cash position of RM171.1m together with zero borrowings as well as positive net operating cash flow.

SFP Tech Holdings Bhd (SFPTECH) is regarded as a one-stop automated equipment solution provider that offers conceptualising, designing, assembling, and commissioning of automated equipment and production line systems for factory manufacturing lines. Their key clients are predominantly in the semiconductor, electrical & engineering and solar photovoltaic industries.

The FBM KLCI remained bearish as investors selling pressure in banking and selected consumer heavyweights, while investors piled into small and mid-cap stocks. We deem the pullback on Wall Street overnight as a healthy consolidation, while the local bourse may track regional markets’ uptrend move and bargain hunting activities may emerge. Investors may monitor Japan’s and Eurozone’s GDP, as well as China’s inflation rate to gauge the aggressiveness of global interest rate hikes.