PETRONAS Chemicals Group Bhd (PetChem) shares closed at their highest in almost two years on Thursday, driven by geopolitical tensions in the Middle East that have sparked expectations of supply chain disruptions in the energy and petrochemical sectors.
The counter jumped as much as 11.1% or 60 sen to RM6 before closing at RM5.97 with almost 40 million shares traded, giving the company a market value of around RM47.8 billion.
The rise came after a decline of more than 11% in the previous session as investors repositioned ahead of a potential escalation of the conflict following signals that the United States may intensify its actions against Iran.
Opening at RM3.05 per unit in early March, PetChem shares nearly doubled to hit a record high of RM6.15 per unit on April 1, reflecting increased investor interest amid concerns over global supply disruptions.
The surge has also prompted several research firms to upgrade their ratings and target prices.
MBSB Investment Bank said that fertilizer prices such as urea have risen on seasonal demand in key markets such as the US, Europe and China, with precautionary buying taking place due to supply uncertainties.
This has increased price volatility and created a risk premium in the fertilizer market as demand remains strong while supply is increasingly tight.
At the same time, methanol prices have also strengthened, rising around 4.5% in a day and almost 30% so far in March, tightening the downstream chemicals market.
Despite the upward revision by analysts, PetChem shares are currently trading around its 12-month average target price of RM5.34, with a consensus recommendation of eight ‘buy’, nine ‘hold’ and one ‘sell’.
PetChem’s cost structure advantage is also supported by its long-term gas supply agreement with its parent company, Petroliam Nasional Berhad (PETRONAS), which has helped stabilise input costs and support margins in a challenging market environment.
