This article first appeared in The Edge Financial Daily on January 9, 2020
KUALA LUMPUR: Malaysian stocks took a beating yesterday in tandem with major global markets amid concerns about an escalation of tensions between the US and Iran.
The benchmark index fell 21.94 points or 1.36% to close at 1,589.10 yesterday, reversing its gains on Tuesday.
However, some analysts believe investors may have overreacted to the news of Iran’s attacks and the likelihood of a US retaliation. Yesterday, Iranian forces launched 15 ballistic missiles against two US military bases in Iraq in retaliation to the US air strike that killed Iran's second-most powerful military commander Qasem Soleimani on Jan 3.
At press time, there had been no US reports of casualties yet, but Iran’s elite Revolutionary Guard claimed that dozens of US soldiers were killed.
Hong Leong Investment Bank Research analyst Loui Low Ley Yee viewed that even if the US-Iran tensions turn into a full-blown war, it would be brief.
“Based on the current trading momentum and sentiment, it seems like [investors believe] the US could go to war with Iran. Still, even if it happens, it wouldn’t last (given the US’ high weapon technologies),” he told The Edge Financial Daily.
Low sees opportunity for bargain hunting in the current market, especially for dividend yield stocks. He also likes real estate investment trusts for their defensive characteristics.
“For crude oil play, we can look at Hibiscus Petroleum Bhd and Reach Energy Bhd, but most people have already taken positions unless Brent crude price increases beyond US$75 (RM308) per barrel,” he added.
Bursa Malaysia’s energy index fell 20.82 points or 1.64% as Brent crude futures dropped 0.72% to close at US$68.74 yesterday, after earlier rising to their highest since mid-September at US$71.75.
Malacca Securities Sdn Bhd senior analyst Kenneth Leong said regional markets and the US bond market had shown signs of recovery after investors overreacted to the news.
He does not think Iran is seeking an escalation with the US but just defending itself unless the US continues its offensive action.
“We are not sure how is it going to be. It all depends on [US President Donald] Trump’s statement tonight (last night),” he added.
Following Iran’s missile attacks, Iranian Foreign Minister Javad Zarif said on Twitter the country had “taken and concluded proportionate measures in self-defence” and that it does not seek escalation or war.
Trump had earlier tweeted that “all is well” and an assessment of casualties and damages is taking place. The killing of Soleimani came amid the impeachment of Trump last month for abuse of power and obstruction of Congress.
According to Reuters, The Thai benchmark led declines in the Southeast Asian region yesterday, down 1.64%, while Singapore’s benchmark index slipped 0.06%.
Meanwhile, Japan’s Nikkei was down 1.29%, the Shanghai Composite Index shed more than 1% and Hong Kong stocks closed 0.8% weaker. Wall Street, meanwhile, was set for a weaker open.