KUALA LUMPUR (Jan 5): Petrochemical prices could go on a short rally in 2026, making PETRONAS Chemicals Group Bhd (KL:PCHEM) a high-risk stock that could produce high returns, a research house said.

While the company still faces near-term earnings headwinds, Kenanga Investment Bank is flagging a potential for a short-term supply squeeze in 2026 from higher-than-normal plant turnaround activities as a major cluster of global facilities undergo maintenance.

“We believe our supply-tightness thesis could still play out in the coming months,” the research house said in a note.

Kenanga has an 'outperform' call on PETRONAS Chemicals, which goes against the majority of analyst recommendations, and a target price of RM4.70 that suggests a potential 32% gain from its last price.

Shares of PETRONAS Chemicals have lost nearly 29% of their value last year amid persistent losses at the company that manufactures olefins, polymers, fertilisers, methanol and specialty chemicals as product prices fell across the industry amid a supply glut.

In response, China and South Korea have initiated measures to rationalise production capacity though the effects on output and prices remain to be seen.

Overall, polyethylene prices are still heading south, currently hovering around US$900 (RM3,668.40) per tonne, amid lower oil prices and persistent oversupply, Kenanga said.

Results for the final quarter of 2025 for petrochemicals companies will remain under pressure, especially for PETRONAS Chemicals whose feedstock costs are largely fixed and less responsive to the decline in oil prices, the research house cautioned.