KUALA LUMPUR: Diminishing hopes over a peace deal in the Middle East are sending investors scrambling for cover, although the Malaysian market's reaction has been relatively subdued.
The FBM KLCI started Tuesday little changed, even marginally higher, at 1,727.52 despite the heightened geopolitical risk.
Malaysia's energy players rallied following the jump in Brent crude oil futures past US$90 a barrel, helping to support the main index despite a broadly weaker trading market
Apex Securities said the immediate market environment in Malaysia remains cautious rather than outright bearish.
"Malaysia continues to have pockets of relative strength, but external risks are likely to dictate short-term sentiment.
"The most constructive scenario would be stabilising oil prices, no further escalation in the Middle East, resilient U.S. consumer earnings and softer bond yields. This combination could encourage investors to move back into risk assets and provide room for the KLCI to recover," it said in its market outlook.
On the other end of the spectrum, the key downside scenario would be a further escalation in US-Iran tensions accompanied by another surge in crude oil and bond yields, particularly if US retail earnings simultaneously signal weaker consumer demand.
"Such a combination would intensify concerns over slower growth and persistent inflation and could keep investors defensive," said Apex.
The research firm expects selective stock-picking on the local market. Traders will be focused on domestic defensives, construction, selected energy names and technology counters supported by semiconductor demand, while keeping a close watch on financial heavyweights for signals on the KLCI's broader direction.
There was a jump in oil-related and plantations counters on the heavyweight index. PETRONAS Chemicals rose seven sne to RMRM4.68, Kuala Lumpur Kepong gained 14 sen ot RM21.70 and SD Guthrie climbed six sen to RM6.59.
Top actives on Bursa Malaysia were JAKS Resources unchanged at 13.5 sen, Tanco down 0.5 sne to 24 sen and Ingenieur up 0.5 sen to four sen.
