The FBM KLCI extended Friday’s decline amid widespread sell-off. In view of the tightening monetary policy in the US going forward and the Covid-19 restrictions in China, investors may remain cautious over the near term; selling pressure could continue on the regional stock exchanges as well as on the local front. Closer to home, investors will be monitoring on the Bank Negara’s interest rate decision and statements on the economic growth outlook scheduled on Wednesday.

Lii Hen Industries Bhd (LIIHEN) is one of the leading furniture manufacturers in Malaysia in UV Robotic finishing product to Solid Dinettes. The group’s factory and showrooms that has 3.1m sqf of built-up area is located at Muar, Johor and their products are mainly sold to the overseas market (95% to North America, 4% local and 1% in other markets across the globe).

The FBM KLCI plummeted on Friday in tandem with regional peers on the back of bearish global sentiment following a sharp decline on Wall Street and the net outflow of foreign funds. As the US stocks suffered another selloff, we expect the local bourse to follow suit, especially within the technology sector. Nevertheless, there might be bargain hunting activities ahead of the earnings season especially in the recovery-themed sectors as well as REITs.

We are sanguine on the deal as the move will cement OMH position as one of the largest vertically integrated manganese ore and ferroalloy player in South East Asia market that is operating as the world’s low-cost quartile smelter. The move that would be earnings accretive over the long run would benefit OMH that is tapping into the rising demand for building material products alongside with leveraging into the soaring raw material prices.

The FBM KLCI slid below the key 1,600 level in mid-day as weakness in banking and telecommunication heavyweights weighed on the key index. We believe the market could be pricing in softer economy growth globally as China is still having lockdowns on and off in various regions. Given the violent selloff on Wall Street overnight, we believe the technology sector may continue to struggle. Nevertheless, the elevated commodity prices should continue to support the relevant sectors such as energy and plantation.

Malaysia’s first public listed independent oil and gas exploration and production firm, focusing on the development and production of oilfield assets in United Kingdom, Malaysia and Australia. The completed acquisition of Repsol Exploración SA assets will generate more than double of its daily production to 23,000 bdp. One of the prime beneficiaries under the high crude oil prices environment (Brent oil price is hovering above USD100/bbl). Technically, price has formed a flag-formation breakout above RM1.25, targeting the next resistances at RM1.30-1.38 with long term target set at RM1.50.

The FBM KLCI surpassed the 1,600 level prior to the long weekend as investors took cue from the positive performance on Wall Street. As the US Federal Chair eased the concern over a more aggressive rate hikes outlook, we foresee the big surge on Wall Street overnight may spill over to the stocks on the local front. Despite the worries of the Covid-19 lockdown in China would slowdown the economic growth, we believe the elevated commodity prices may provide support for the respective sector at least for the upcoming reporting season.

We understand that the decline in sales volumes was mainly impacted by the delay in shipments in end-March 2022. As such, a total of 405,269 MT of ores and alloys (-27.0% QoQ) were transacted during the quarter. Given that the production is touted to be within our expectations, we made no changes to our earnings forecast for now. Consequently, we maintained our BUY recommendation on OMH with an unchanged target price of RM3.65.