Oil price rally will not significantly impact KLCI earnings, says CIMB Research

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KUALA LUMPUR (April 26): CIMB IB Research has maintained its end-2018 FBM KLCI target of 1,880 points and said it does not expect the recent oil price rally to significantly impact KLCI earnings.

In a strategy note yesterday, the research house said Brent crude oil price recently rallied to a 3.5-year high of US$74/barrel.

It said high oil prices will have a positive impact on Malaysia’s gross domestic product, current account and fiscal revenues, but will raise the country’s inflation risk.

“Potential key winners are oil and gas, agribusiness and petrochemical players.

“Potential key losers are airlines, shipping, media and rubber gloves players.

“We do not expect the recent oil price rally to significantly impact our KLCI earnings. Maintain end-2018 KLCI target of 1,880 points,” it said.

CIMB Research said a rising oil price trend will be positive for all oil and gas stocks, either directly via exposure to higher selling prices of crude oil and oil products, or indirectly as oil and gas majors become more confident in capex spending, which will eventually feed into demand for services.

“Key winners in the short term from higher oil price are Sapura Energy Bhd and Petronas Dagangan Bhd. A higher crude oil price will also be supportive of CPO prices and positive for Petronas Chemicals Group Bhd,” it said,