The FBM KLCI ended marginally lower amidst the mixed regional markets sentiment, paring most of its intraday losses as bargain hunting activities emerged. We believe the jump on Wall Street on Friday, coupled with the reopening of China’s border could spark a rally on the regional markets as well as on the local bourse. We believe the market is more positive-biased on the inflationary pressure as the US December 2022 payroll came in greater than expected, but the slowdown in wage growth could indicate that the Fed’s battle against inflation may have an impact.

The FBM KLCI rebounded into the positive territory as foreign funds turned into net buyer after 4-day outflow streak. While the reopening of China borders may continue to stimulate economic activities, the stock markets may remain volatile as recessionary concerns could still remain as top agenda following the release of US job data overnight, which may signalled further increase in interest rate outlook.

The FBM KLCI wobbled into the negative territory as lack of fresh catalyst coupled with the persisted fears over global recession prompted the cautious trading environment. We believe the subdued trading tone could be temporary as the local bourse should poised for recovery on bargain hunting activities as Malaysia government re iterated that it will only tighten the Covid-19 SOP without discriminating against any nation; this should provide a boost towards our economic activities.

The long-awaited recovery is likely to emerge with the reopening of China’s travel borders. We believe this will be able to offset the recession risk under the (i) elevated interest rate environment, (ii) ongoing tension between the Ukraine and Russia and (iii) overheated inflationary pressure at least for 1H2023. We are feeling cautiously optimistic on the local front after (i) a solid GDP growth in 2022, (ii) stable political environment and (iii) the reopening of China’s borders. Hence, we have a few themes under our 1Q23 outlook and strategy, namely the (i) Recovery, (ii) Renewables, (iii) Commodities and (iv) Resilient.

The FBM KLCI kicked off the first trading day in 2023 in the negative territory as market digested recent gains buoyed by year-end window dressing activities. We believe the pullback could be deemed as a healthy pullback and bargain hunting activities should pick up in undervalued stocks despite worries over the Covid-19 sub-variants may continue to weigh on investors’ sentiment. Still, we believe the reopening of China’s travel borders may provide decent growth for most of the global economies with another round of pent-up demand.

Established in 2006, Hektar has now expanded its property portfolio to 6 shopping centres spanned across Subang Jaya, Melaka, Muar, Sungai Petani, Kulim, and Segamat worth a total of RM1.20 bn. We project core earnings to be driven by improving occupancy rate amid economic recovery in FY24f, as well as the REIT’s initiatives to improve energy efficiency. Hektar is valued by pegging its FY23f core EPS of 7.7 sen to P/E of 11.0x, leading to a FV of RM0.84. Projected dividend yield is attractive at 9.9% for FY23f based on current share price.

The FBM KLCI ended higher on the final trading day as window dressing activities in utilities, banking and telecommunications heavyweights lifted the key index, albeit foreign funds showed an outflow of RM304.1m. After the window dressing activities, we expect local bourse to pullback in the near term, digesting the Covid-19 situation in China. Nevertheless, we believe the reopening of business activities and travel borders in China should be able to avoid the recession risk going forward.

The FBM KLCI continues to trade positively, driven by the ongoing year-end window dressing activities in the banking and telco heavyweights. Also, with the positive rebound on Wall Street, it may spillover to the local front and trading activities to stay on an upbeat manner; the FBM KLCI should revisit the 1,500 level. Traders will be focusing on the China’s borders reopening catalyst and position themselves for the recovery theme trades.