Deal Rejection Clouds KLCI Recovery Momentum

Malaysian Market Review: The FBMKLCI snapped a five-day winning streak to close lower by (- 0.61%) at 1,748.06 on Friday, as profit-taking set in after renewed US military activity in the Strait of Hormuz dampened risk appetite across regional bourses. Market breadth turned negative with 547 gainers against 597 decliners. Sector wise, Healthcare (+0.82%), Industrials (+0.74%) and Property (+0.67%) led gains, while Construction (-0.36%) and Consumer (-0.28%) and Energy (- 0.25%) were the main laggards.

Global Markets

U.S. equities closed higher on Friday, with the S&P 500 (+0.84%) and Nasdaq Composite (+1.71%) both hitting fresh all-time highs, buoyed by a stronger-than-expected April jobs report showing 115,000 nonfarm payrolls added against a forecast of 55,000, while the Dow Jones Industrial Average edged up (+0.02%), as gains in memory stocks offset lingering caution over renewed US-Iran hostilities in the Strait of Hormuz (CNBC). European equities closed lower, with the STOXX600 declining (-0.69%) as Trump threatened higher tariffs on the EU after accusing Brussels of failing to honour the terms of last July’s transatlantic trade agreement, while defence stocks sold off sharply with Rheinmetall tumbling (-9.2%) amid easing Middle East ceasefire concerns (CNBC). Asian markets closed mostly lower, with the Nikkei 225 (-0.19%), Hang Seng (-0.87%) and Australia’s S&P/ASX 200 (-1.51%) retreating as renewed hostilities in the Strait of Hormuz rattled investor confidence, though South Korea’s Kospi edged up (+0.11%) in choppy trade (CNBC).

Market Outlook

The near-term outlook has turned more cautious after President Trump dismissed Iran’s response to a US 14-point memorandum of understanding as “totally unacceptable,” dampening hopes of an imminent breakthrough, while Israeli Prime Minister Netanyahu insisted that Iran’s enriched uranium stockpile must be dismantled before the war can be considered over (BBC, CNN). Tehran’s proposal, sent via Pakistani mediators, reportedly included an immediate end to hostilities on all fronts, a halt to the US naval blockade and guarantees of no further attacks, but Iranian President Pezeshkian struck a defiant tone, saying Iran “will never bow our heads before the enemy” (BBC). Brent crude settled at around USD101 per barrel on Friday, posting a weekly loss of approximately 7.3% on early deal optimism, though the collapse in diplomatic momentum could see prices rebound amid the continued closure of the Strait of Hormuz (CNBC). Defence ministers from more than 40 nations are meeting on Monday to discuss UK-led plans to protect shipping in the strait, while Iran has warned that countries enforcing sanctions will face problems when their vessels transit the waterway (BBC). For the FBMKLCI, sentiment is expected to come under renewed pressure as geopolitical risk reprices, with investors closely tracking oil price movements and diplomatic developments.

Sector focus

We favour Technology in the near term, supported by sustained AI capital expenditure commitments and a strong rally in US memory stocks, with Micron and Sandisk surging more than 15% on Friday alone (CNBC). Energy is likely to see renewed upside interest as the breakdown in US-Iran talks raises the prospect of prolonged Strait of Hormuz disruption, with Brent still above USD100 per barrel and US Energy Secretary Chris Wright flagging a potential federal gas tax suspension as fuel costs surge (CNN, CNBC). Plantation may find some support from firmer crude oil prices bolstering biofuel economics, though CPO futures remain under pressure below RM4,550 per tonne and Malaysia’s B15 biodiesel mandate taking effect June 1 should provide a floor for domestic demand. We remain cautious on Shipping and Logistics given the increasingly uncertain timeline for the reopening of the Strait of Hormuz, particularly after Trump’s rejection of Iran’s proposal removed the near-term catalyst for a resumption of commercial transit (BBC, CNN).

Source: Apex

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