KLCI advances on buying support for O&G stocks


MALAYSIA’S equity market was bolstered by the performance of oil and gas (O&G) stocks following the spike in oil prices, but this failed to excite overall market sentiment.

The FTSE Bursa Malaysia KLCI (FBM KLCI) index climbed 3.05 points to close at 1,604.3 yesterday, underpinned by the performance of large-capped O&G companies while energy-related counters ended yesterday’s session in the green.

This follows the drone attacks on critical Saudi Arabian oil sites over the weekend which disrupted 5.7 million barrels of daily crude oil production or more than 5% of global oil production.

“The market started with some knee-jerk reactions yesterday as many were overly zealous of the impact on the crude prices from events in Saudi Arabia,” Rakuten Trade Sdn Bhd head of research Kenny Yee told The Malaysian Reserve.

“We believe regional markets continue to be volatile in view of the interest rates scenario and the latest geopolitical tension.”

He said escalation of geopolitical tensions in the Middle East is expected to result in temporary knee-jerk reactions across financial markets, but noted that its impact on crude oil prices could prove more profound.

The FBM KLCI should trade between 1,600 and 1,620, provided there are no added surprises from the Middle East, he said.

Despite the benchmark closing higher, market sentiment was negative with losers leading gainers 510 to 382 as 2.73 billion shares were traded, valued at RM2.18 billion.

Petronas Chemicals Group Bhd (PetChem), Hengyuan Refining Co Bhd and Petron Malaysia Refining & Marketing Bhd were among the top gainers for the day, closing 4.86%, 6.89% and 4.92% higher respectively.

Other Petroliam Nasional Bhd-linked companies also ended the day higher. Buying was also spread across the smaller-capped O&G counters in the market.

Shares in Hibiscus Petroleum Bhd rose 6.5 sen or 6.8% to close at RM1.02, while Sapura Energy Bhd and Bumi Armada Bhd closed 5.36% and 3.28% higher respectively.

O&G service providers such as Velesto Energy Bhd, Dayang Enterprise Holdings Bhd and Uzma Bhd traded higher yesterday.

Affin Hwang Investment Bank Bhd said the scale of the Saudi Arabian oil supply disruption should result in more bullish sentiment for oil prices and the sector as a whole in the near term, putting O&G stocks under the spotlight.

“Hibiscus (non-rated) is the direct proxy to benefit from an oil price recovery. In our coverage, PetChem stands to benefit from a recovery in petrochemical prices and Petronas Dagangan Bhd with a possible inventory lagged gain,” its analyst Tan Jianyuan wrote in a report yesterday.

Tan said the research firm has ‘Buy’ calls on O&G service providers Serba Dinamik Holdings Bhd, Bumi Armada, Velesto Energy and Kelington Group Bhd despite these companies’ earnings not directly benefitting from higher oil prices.

“We believe these stocks would likely see higher interest in view of the current bullish oil price sentiment.”

The research firm still maintains a ‘Neutral’ rating for the sector as the oil supply disruption is viewed as temporary.