KUALA LUMPUR (June 29): Malaysian shares were mostly lower on Monday, bucking gains in most Asian markets as investors turn their attention back to the geopolitical conflict in the Middle East.

The benchmark FBM KLCI ended at 1,665.91 points, down 0.1% or less than two points, after falling as much as 12 points. Hospital operator IHH Healthcare Bhd (KL:IHH) fell over 1.6% to RM8.40, the biggest drag on the 30-stock index.

“Investors will likely stay defensive in a market” watching closely the situation in the Middle East, said CIMB Securities analyst Ivy Ng. However, current market conditions “offer good opportunities to pick up defensive stocks at attractive prices," she said.

Equity markets in Asia largely rebounded from early losses as US and Iran agreed not to further escalate their weekend strikes, though South Korean and Indian indices remained lower.

Brent, the global benchmark for crude oil, edged up 0.9% to US$72.80 per barrel. 

‘’Our view is that the current situation in the US-Iran conflict remains a tense, conditional de-escalation, not full normalisation or re-escalation," Imran Yassin Yusof, head of research at MBSB Research, told The Edge. "We saw that despite the tit-for-tat strikes, both parties have resumed talks, and oil prices did not jump spectacularly as before." 

This week, investors will be watching US labour market data and central bankers gathering in Portugal where Federal Reserve chair Kevin Warsh will be speaking for clues on US monetary policy.

Geopolitical flare-up will lift oil prices and higher US interest rates would also push foreign funds out, BIMB Securities cautioned.

The lack of fresh catalysts and persistent foreign fund outflows are likely to keep sentiment subdued, while political risk premiums remain elevated ahead of the Johor and Negeri Sembilan state elections, Hong Leong Investment Bank said.

“The KLCI has turned increasingly bearish, with weakening technical indicators reinforcing the deteriorating medium-term outlook,” the house added.