O&G stocks see active trading as oil rises to five-week high

Posted on 17 August 2016

Source: The Edge

Oil and gas (O&G) related plays such as Bumi Armada Bhd, SapuraKencana Petroleum Bhd and Sumatec Resources Bhd were among the most actively traded on Bursa Malaysia yesterday, on investor optimism over oil producers freezing output.

Global oil prices extended their gains to the highest levels in over five weeks, with Brent crude futures touching US$48.74 (RM193.98) per barrel — their highest point since July 7, according to Reuters data.

M&A Securities Sdn Bhd head of research Rosnani Rasul noted that there have been reports over Russia’s negotiation with Saudi Arabia for a possible freeze in oil production, with the aim of stabilising global crude oil prices, ahead of the Organization of the Petroleum Exporting Countries (Opec) meeting next month.

“This prospect has elevated risk-taking in Wall Street and hence, oil producing countries equity market [like] Malaysia may also follow in tow today [yesterday],” she wrote in a note to clients.

Areca Capital Sdn Bhd chief executive officer Danny Wong noted that Malaysian equities appear to be more attractive now, especially after the rebound in crude oil prices.

“Foreign funds have been consistently buying as Malaysia, along with the other emerging markets, appear to be attractive now seeing that crude oil prices recently rebounded, crude palm oil prices are up and the ringgit has strengthened,” he told The Edge Financial Daily.

Bumi Armada, along with its warrant stock ARMADA-C16, as well as SapuraKencana and its warrant stocks SKPETROC25 and SKPETROC17 were among the top gainers yesterday.

Bumi Armada shares rose 2.5 sen or 3.21% to close at 80.5 sen, bringing a market capitalisation of RM4.72 billion. Some 36.66 million of its shares were traded, more than double its 200-day average volume of 17.53 million shares.

SapuraKencana’s share price gained two sen or 1.27% to settle at RM1.59, with a market capitalisation of RM9.59 billion. The stock saw 32.78 million shares changing hands versus its 200-day average volume of 14.91 million shares.

Other heavily traded O&G-related counters yesterday included Sumatec Resources, KNM Group Bhd and Daya Materials Bhd, which saw trades of 68.35 million shares, 36.59 million shares and 22.86 million shares respectively.

An analyst pointed out that the rise in crude oil prices has been based mostly on speculation that producers will cap output. However, he is of the view that it is unlikely Opec would agree on a production cut.

“Although the O&G-related counters have benefitted from the rise in oil price, the gains may not be sustainable as it remains to be seen whether the Opec nations will actually agree to cut production.

“And even if Opec does reduce its production, it will still take some time for the impact to be seen, depending on the quantum of reduction in supply,” the analyst said.


Most broad-market equity indices finished in positive territory yesterday, with the benchmark FBM KLCI ending up 9.56 points or 0.57% at 1,699.89.

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