The FBM KLCI saw a mild setback despite a bullish momentum across the regional markets; KLCI’s earlier gains faded in the afternoon session. In view of the softer Wall Street performance, sentiment on the local bourse may turn cautious as attention shifted back to the US Fed’s interest rate policy following the release of the Fed’s July meeting minutes. Nevertheless, investors may look out on the upcoming earnings season, stocks with solid earnings growth under this environment will be on the focus.

Cost wise, both soybean and maize prices continued its uptrend move QoQ, driven by the supply disruptions arising from Russia-Ukraine conflict, global fertiliser price hike as well as increased freight cost. The continued elevated feed price, coupled with the price control scheme have hit TEOSENG’s margin despite the cushion of egg subsidy from the government.

Ramssol Group Bhd (RAMSSOL) is regarded as a human capital management (HCM) solution and technology specialist provider. Some their key customers include notable entities such as Capitaland Ltd, RHB Bank Bhd, National University of Singapore, Paramount Corporation Bhd, ThaiFoods Group PLC and Export Import Bank of Thailand.

The FBM KLCI staged a strong breakout, mainly fuelled by buying interest in the telecommunication heavyweights, coupled with the healthy inflow of foreign funds; 5-day net foreign buying stood at RM719.8m. While the global markets may keep an eye on UK’s inflation to gauge the global recession risk, we believe the local bourse should remained positive in the upcoming earnings season as the international border was uplifted in April.

Moving forward, we expect demand for plastic packaging to remain robust amid reopening of global economies. Nevertheless, the industry may still face the challenges arising from global economic uncertainties, ongoing conflict between Russia and Ukraine that strains the supply chain, as well as the fluctuating commodities prices. Uncertainties remain with hurricane season right around the corner.

Moving forward, we expect the maintenance segment to anchor the overall performance, backed by multiple long term federal and state road concession agreements will provide earnings visibility till 2029. Nevertheless, the construction segment is also gathering pace, which bodes well for the group overall bottom line as the aforementioned segment was bleeding for the past 2 financial years.

Moving forward, KGB’s outstanding order book at approximately RM1.60bn represents an orderbook-to-cover ratio of 3.1x against FY21 revenue of RM514.6m will provide strong earnings visibility over the next 2 years. Meanwhile, tenderbook remains relatively healthy at around RM2.00bn, supported mainly from on-going wafer fabrication plants expansions of semiconductor players.

The FBM KLCI retreated amid worries over China’s economic slowdown, which led to an unexpected lending rate cut. While the market may trade in a positive-biased mode and looking forward to a brighter outlook in the ongoing earnings season, China’s economic slowdown may indicate risk and a spike in recession fears.