PETALING JAYA: RHB Research remains “overweight” on the basic materials sector amid the current geopolitical risks and market volatility.
In a note to clients, the research house said Press Metal
Aluminium Holdings Bhd is its top pick within the sector, given the group’s potential to leverage its strategic positioning amid Middle East tensions as well as its vertical integration.
RHB Research noted that the Middle East conflict limits the flow of aluminium, as most of the metal produced in the Persian Gulf – representing about 8% to 9% of global supply – passes through the Strait of Hormuz, along with alumina feedstock shipments into the region.
“The conflict has led to a spike in crude oil prices (52% in eight weeks) and the shutdown of liquified natural gas plants, resulting in an increase in operating costs for smelters,” the research house pointed out.
These developments may lead to a positive spillover for aluminium.
RHB Research added, “This reinforces our view of a supply-tightening scenario with limited buffer to absorb supply shocks.
“Assuming Hormuz-related disruptions remain, price pullbacks are likely to be shallow, with tight spot availability keeping prices elevated.”
RHB Research said it has increased its London Metal Exchange price assumption to US$3,250 per tonne.
Spot aluminium prices have risen by 24% to US$3,668 per tonne year-to-date in 2026, bringing the average price to US$3,275 per tonne.
As for Malayan Cement Bhd, RHB Research said the group is more exposed to rising coal prices, but the stock’s valuation currently seems more attractive.
Crude oil and coal prices are closely correlated, with the Rotterdam coal prices also increasing 18% to US$137 per tonne.
Coal accounts for 20% to 30% of Malayan Cement’s costs and, as such, a prolonged increase in coal prices could pressure margins if the higher costs are not passed through, said the research house.
However, with about two months of coal inventory levels, RHB Research expects the cost impact to be delayed – likely affecting earnings more from the fourth quarter of financial year 2026 onwards.
Although diesel prices rose 68% to RM5.12 versus RM3.04 during the pre-conflict period, the research house highlighted that fuel costs only constitute 1% to 2% of Malayan Cement’s total costs, suggesting limited earnings sensitivity to diesel inflation.
While cement prices have notably increased to RM24.43 per 50 kg (up 6% year-on-year), Malayan Cement has yet to increase its average selling price.
“We see this as a market share expansion strategy to maximise volume growth, particularly amid rising cost pressures for smaller players,” said RHB Research.
