KUALA LUMPUR (March 10): Kenanga IB Research has cuts its year-end FBM KLCI target from 1,563 to 1,532, and said the collapse of the OPEC-Russia alliance after both parties failed to agree to an output cut has led to a price war.
In a strategy note today, the research house said Brent lost US$18 (-35%) in two trading days to settle at US$32.50 yesterday.
It said a fall of this scale has consequences on Malaysia’s fiscal account given how significant oil-related income is to the Federal Government revenue.
Kenanga Research said this event could not have come at a worse time as escalating Covid-19 fears and the abrupt change in government are hammering an already fragile economy.
“Fiscal position will weaken, as will prices of other commodities and following that, a weaker ringgit.
“These have forced us to relook our sectors and market outlook again. We immediately cut EPS forecasts and target prices for Oil & Gas and Plantations stocks,” it said.
The research house said banks too are prone to downside risks as interest rates are aggressively reduced and delinquency risks rise.
“We reduce FY20/21 EPS for the FBMKLCI to 94.2/99.5 sen from 96.5/101.5 sen and growth revised to -1.0%/5.7% from 1.4%/5.2%.
“Year-end target is reduced from 1,563 to 1,532,” it said.