Following a heavy selldown in the past week due to continuous outflow of foreign funds, the FBM KLCI bounced higher. Given the strong rebound on Wall Street overnight, we believe the regional markets and local bourse should trade on a higher note. Nevertheless, the rebound may sit on a shaky ground due to lingering global recession fears and lack of fresh positive catalysts; investors may take the opportunity to sell into strength.

Downside risks still prevail on the global markets given the (i) hawkish tone by the US Fed, (ii) ongoing tension between Ukraine-Russia and (iii) recession fear. However, there are some bright spots in the Malaysia’s market with the upcoming (i) Budget 2023, (ii) around-the-corner GE15 and (iii) rebounding Malaysia GDP. Thus, we like potential budget beneficiary sectors like solar, construction and telco. Meanwhile, for the export oriented segments we favour plastic, selected technology, medical and chemical. For domestic related sector, we may focus on automotive and furniture.

Sunway Real Investment Trust (SUNREIT) is regarded as one of the largest diversified REITs in Malaysia. As of 1H22, SUNREIT owns 19 properties in Malaysia valued at RM8.96bn and maintained a healthy average occupancy rate across each segment; retail (94%), hotel (24%) and office (84%).

The FBM KLCI wrapped up 3Q22 with a downbeat note as prolonged bearish cue from the global markets coupled with continuous selling from foreign investors dragged the key index lower. We believe global market turmoil will likely to continue, stemming from fear over potential recession in view of the elevated inflation rate. However, we expect mild bargain hunting activities to emerge ahead of the Budget 2023 this week.

The FBM KLCI declined below the key 1,400 level as increasing concerns over global recession permeated the local bourse. As Wall Street wiped out its gains from the previous session, we reckon that the local sentiment may remain fragile as investors will adopt a wait-and-see approach amid the rising macroeconomic pressure. Nevertheless, we expect mild buying support on index heavyweights for 3Q window dressing activities and the key index may be supported above 1,400.

We made no changes to our FFB production assumption of 280,000MT (1HFY23 numbers makes up to 44.4% of our assumption) as we enter into the seasonally high production cycle months. Optimal productivity, however, will be challenging amid the acute labour shortages as only 12.0% of the registered 400,000 foreign workers for all economic sectors have entered into Malaysia since January 2022.

CGB will be leveraging on the rising demand for adhesive tapes as the group is already operating a maximum capacity and looks to ramp up their production by 3.5x to 70.0m sqm of tapes p.a. Turnaround in FY22f is largely on the cards, backed by the construction segment’s outstanding orderbook of RM410.1m, while FY23f will gain further strength from their on-going manufacturing segment expansion plans. CGB could justify by pegging its FY23f EPS of 14.3 sen to P/E of 9.0x, arriving at a fair value of RM1.29.

The FBM KLCI slid alongside with the regional peers as persistent negative sentiment prevailed and pulled the key index below the 1-year low. However, we believe the local bourse should see decent buying interest after a sharp rally on Wall Street overnight as the surprise policy pivot by the Bank of England should lift the regional sentiment.