KUALA LUMPUR: The FBM KLCI advanced on Thursday, in line with key regional markets, amid positive sentiment as crude oil prices rebounded.
The benchmark index rose 8.08 points to 1,627 at midday. The index opened 1.98 points higher at 1,621.10.
Market breadth was negative with 390 gainers as compared to 253 losers while 282 counters were unchanged. Turnover stood at 808.50 million shares worth RM690.84mil.
Reuters reported that crude prices, the dollar and bond yields were sharply elevated early on Thursday after Organization of the Petroleum Exporting Countries (OPEC) agreed to a deal to reduce output to clear a supply glut that has crunched oil prices and stoked global deflationary pressures.
OPEC had on Wednesday agreed to its first output cut since 2008, with Saudi Arabia accepting “a big hit” on its production. Non-OPEC Russia will also join output reductions for the first time in 15 years to help OPEC prop up oil prices.
JF Apex said following the development in OPEC, sentiment in the local bourse could be lifted by oil and gas counters and the FBM KLCI could stage a rebound with support at 1,610 points.
Following the development in OPEC, sentiment in the local bourse could be lifted by oil and gas counters and the FBM KLCI could stage a rebound with support at 1610 points.
UOBKay Hian said beaten-down oil and gas stocks would rally on a technical basis due to newsflow from Russian and non-OPEC countries in support of OPEC’s recent move.
However in terms of earnings, it said the service players would still see poor visibility for the next few quarters.
“As quoted from a global industry player, all three factors need to be observed for a true fundamental earnings recovery for the sector: sustained recovery in oil prices (along with material drawdowns in inventories by 2H17), recovery in oil major capex, and contracts/ activities must pick up substantially to match the service players’ capacity in order to see reasonable pricing/ utilisation improvements.
“In view that Petronas’ cash flow is still under stress, these will only happen at the earliest in late-17,” UOBKay Hian said.
“We continue to believe that oil majors (including Petronas) will resume austerity measures to ensure cash flow neutrality. We still base our sector P/B valuations on US$50 per barrel oil price assumption, though consensus Brent forecast could see upside adjustments after today,” it added.
International benchmark Brent crude oil prices were trading at US$50.47 per barrel, up US$4.09, or 8.82%.
US West Texas Intermediate (WTI) crude was up 67 cents at US$50.11 a barrel.
Meanwhile, the ringgit weakened against the US dollar. The ringgit is quoted at 4.4685 against the greenback.
Among the key regional markets:
Japan’s Nikkei 225 is up 1.01% to 18,493.91;
Hong Kong’s Hang Seng Index gained 0.55% to 22,914.99;
Shanghai Composite Index rose 0.44% to 3,264.28;
Taiwan’s Taiex accumulated 0.25% to 9,263.53;
South Korea’s Kospi rose 0.21% to 1,987.68 and;
Singapore’s Straits Times Index gained 0.57% to 2,921.59 points.
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