KUALA LUMPUR: Kenanga Research foresees a possible rise in the global market risk premium, including Malaysia, if the Israel-Hamas war to escalate and evolve into a full-scale proxy war between the West (led by the United States) and Iran.
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“For now, we are keeping our FBM KLCI earnings forecasts and year-end FBM KLCI target of 1,520 points as the war is still a developing situation.
“We are also keeping our sector and stock picks, which happen to be more defensive in nature,” it said in a note today.
Kenanga Research said the global stock, bond and commodity markets have already reacted forcefully to the attack on Israel by Hamas over the weekend.
It said stock markets across the Middle-Eastern region are in a sea of red, with Israel’s benchmark index Tel Aviv Stock Exchange 35 plunging by 7.0 per cent, while the Dow Jones Industrial Average and the Nasdaq are poised to open at about 0.6 and 0.7 per cent loss, respectively, based on their live futures prices.
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On the other hand, the research house said Brent crude oil futures prices have jumped more than 4.0 per cent to US$88 per barrel, while the flight to safety has seen US 10-year Treasury yield easing 7.0 basis points (bps) to 4.72 per cent.
“While Israel and Palestine are not key producers of oil and other key commodities, they are basically at the doorstep of the Middle East, which is a major oil-producing region in the world.
“An escalation of the war could potentially eventually disrupt the production or transportation of oil out of the region,” it said.
In any case, Kenanga Research said the perception of a heightened geo-political tension itself is sufficient to keep oil prices high, adding inflationary pressure to the global economy.
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