The Risk-Off Environment May Persist

Market Review

MY: Sentiment in the local front weakened amid rising tension between Israel and Iran, with the FBMKLCI (-0.56%) declining to 1518.11 pts, led by financial heavyweights like MAYBANK, CIMB and PBBANK. On the broader market, the Energy sector outperformed, while the Technology sector declined the most.

US: Wall Street closed lower as heightened tensions between Israel and Iran triggered risk-off sentiment, fuelling a global selloff, while safe-haven assets and oil prices surged. The Dow, S&P500 and Nasdaq closed lower by 1.8%, 1.1% and 1.3% respectively, while VIX spiked towards 20.8 pts.

The Day Ahead

US: Wall Street edged lower last Friday following Israel's attack on Iran, intensifying global risk-off sentiment. G7 leaders gathered in Canada starting Sunday, with the Israel-Iran conflict to be high on their agenda. Meanwhile, Boeing and global aviation stocks faced pressure after a fatal Air India Dreamliner crash, raising concerns over Boeing's safety record. On the economic front, May's CPI came in softer-than- expected, easing some inflation worries and the Fed's rate cut expectation has now shifted toward September, with more than 50% probability of a 25bps cut. In the commodities market, both Brent oil and Gold continued to rise, trading at USD74/bbl and USD3,432, respectively, amid heightened geopolitical tensions, while CPO prices broke above RM3,900/MT.

MY: Following the intensified Israel-Iran conflict over the weekend, we expect the local bourse start the week on a softer tone, as investors may adopt a risk-off approach. Given the spike in both Brent oil and gold prices, trading opportunities may emerge in the O&G-related and gold companies, as these commodities are trading in an elevated environment. Lastly, investors may continue to focus on defensive sector like Utility and REITs, with GASMSIA and SUNREIT being our top preferences.

FBMKLCI Technical Outlook

The key index continued to trade below the MA lines, with technical indicators showing recovering momentum; MACD histogram has expanded above zero, while RSI is near 50. Resistance is anticipated around 1,533-1,538, while support is located at 1,498-1,503.

Company Briefs

Dialog Group Bhd (DIALOG) has secured a 14-year production-sharing contract (PSC) from Petronas for the Mutiara Cluster Small Field offshore Sabah. Dialog's wholly owned unit, Dialog Resources Sdn Bhd, will serve as the sole operator with a 100% participating interest in the five-field cluster - Nymphe, Nymphe North, Kuda Terbang, Benrinnes, and Mutiara Hitam. This marks the first PSC Petronas awarded under the Malaysia Bid Round 2025 (MBR 2025), with first production targeted for 2029. The contract includes a two-year pre-development phase, followed by a two- year development phase, and a 10-year production phase. (The Edge)

Johor-based underground utilities engineering solutions provider UUE Holdings Bhd (UUE) has secured three new contracts worth RM83.4m. The latest wins - awarded by Sutera Utama Sdn Bhd - were announced just three days after UUE reported securing RM92.4m worth of deals. With these additions, the company's order book has reached a record high of RM416m, providing earnings visibility for the next two to three years. (The Edge)

Axiata Group Bhd (AXIATA) has completed the sale of its Myanmar tower operations for a revised US$90m (RM380.4m), down from the originally proposed US$150m. The sale was made via its 63%-owned unit edotco Group Sdn Bhd, which sold its 87.5% stake in edotco Investments Singapore Pte Ltd to Hong Kong-based Zillion Tower Holdings Ltd. Axiata said the revised price was agreed on a willing-buyer, willing-seller basis after a strategic review, which included an outreach to alternative credible potential acquirers. (The Edge)

A consortium led by DCAH Holdings and individuals Chiong Kiau and Chiong Hang Leong has acquired a 10% stake in Sabah-based palm oil company Kretam Holdings Bhd (KRETAM) for about RM162m, becoming its second-largest shareholder. The acquisition comes at a time when food oil prices have re-rated higher in recent years amid persistent geopolitical tensions and weather disruptions that have weighed on supply. The acquisition was executed via two entities controlled by the consortium - Kahang Palm Oil Mill Sdn Bhd and Jeng Huat (Bahau) Realty Sdn Bhd. (The Edge)

IOI Corp Bhd (IOICORP) said former Bursa Malaysia Bhd (BURSA) chairman Tan Sri Abdul Wahid Omar will join its board as a senior independent and non-executive director on June 16, 2025. The announcement comes after Abdul Wahid's appointment to the board of Cypark Resources Bhd (CYPARK) last week as its chairman. (The Edge)

Rex Industry Bhd (REX) has received a mandatory takeover offer at 10 sen per share from new major shareholder ETA Industries Sdn Bhd, after the latter acquired a 40.59% stake for RM26.81m, or 10 sen apiece. Included in the deal is the acquisition of 39.18% of Rex's total warrants at half a sen per warrant. Under the takeover rules, ETA Industries is required to extend the offer to the rest of Rex Industry's shareholders. Nevertheless, ETA's CEO Lim Chin Hui, the ultimate offeror, intends to maintain Rex Industry's listing on Bursa Malaysia. (The Edge)

Boeing Company (BA) shares fell after an Air India plane flying to London crashed in Ahmedabad in western India shortly after take-off on Thursday. Citing local police, the Financial Times reported that the plane crashed "within 10 minutes" of take-off from the airport in Ahmedabad. The plane was a Boeing 787-8 Dreamliner. GE Aerospace's GEnx-1B engines were said to have powered the 787 Dreamliner. (Investing.com)

Oracle Corporation (ORCL) shares surged on both Thursday and Friday (despite the risk-off environment) after the company reported impressive quarterly earnings, topping consensus expectations. The stock has risen more than 23% in the last week. (Investing.com)

Source: PublicInvest Research - 16 Jun 2025