KUALA LUMPUR: The financial performance of almost half of the stocks under Hong Leong Investment Bank Bhd's (HLIB Research) coverage came within expectations for the recently concluded third quarter (Q3) 2022 results season.

The bank-backed research firm said that out of the 116 stocks, 47 per cent came in within expectations, 28 per cent above and 25 per cent below.

When stacked against consensus estimates, 47 per cent were in line, 31 per cent above and 22 per cent below.

As compared to the preceding quarter (Q2), HLIB Research said there was a slight reduction in disappointments (26 per cent to 25 per cent), while positive surprises increased (22 per cent to 28 per cent).

Consequently, from a ratio perspective of the results, this rose quarter-on-quarter (QoQ) from 0.87x to 1.14x.

"Notable positive results surprises came from brewers (higher average selling prices and a better sales mix from premium brands), oil and gas (primarily company-specific factors), and property (stronger-than-expected sales, especially from completed and near-completed projects).

"On the flip side, disappointments largely stemmed from gloves (volume decline, soft average selling price and rising cost), Genting Group (dragged by Genting Malaysia Bhd on higher-than-expected interest and tax), technology (slower personal computer and smartphone demand) and wood and furniture manufacturing (weaker furniture demand due to falling US home sales)," it said in a note today.

HLIB Research estimates that aggregate core earnings for its coverage rose 6.9 per cent QoQ and 20.3 per cent year-on-year (YoY)—noting that in both periods, the overall positive earnings growth was partially offset by weaker performance for gloves and plantation.

It added that the cumulative nine-month 2022 aggregate earnings were flat (0.4 per YoY)—while most companies saw earnings improvement, this was more than offset by the cliff dive in glove earnings.

HLIB Research added that with the post-15th General Election (GE15) political impasse resolved, and the cabinet unveiled over the weekend, this points to some degree of political stability – at least in the near term.

"Externally, the US Federal Reserve is expected to reduce its quantum of rate hikes as soon as December—a cheer for markets considering that its pace this year has been the fastest in recent history.

"Nevertheless, we remain cognisant of the potential challenges in 2023 - rising probability readings of a US recession over the next 12 months and the reemergence of domestic political fluidity—six state elections are due to be held in the second half (2H) 2023, which may have implications on the working relationship within this unity government," it said.

Overall, HLIB Research projected FBM KLCI earnings growth of -8.2 per cent and +6.9 per cent in 2022 and 2023.

The research firm has also maintained its FBM KLCI year-end target of 1,530.