KUALA LUMPUR (June 18): Affin Hwang Capital Research has downgraded the Oil & Gas sector (O&G) to “Neutral” (from Overweight) and said with heightened uncertainty over global demand and a good run-up in O&G stock prices in 1H19, the risk-reward profile is skewed to the downside.

In a note today, the research house said while better corporate earnings delivery and contract flows are among the key items to look out for in 2H19, these are likely already priced in.

“We believe the upcoming OPEC meeting will see an extended production cut, although at a smaller quantum in view of the rebalanced oil market.

“As for stocks, we continue to like Petronas Chemicals Group Bhd as our big-cap pick on additional RAPID capacity likely contributing to earnings in FY20E and a better product price outlook.

“Serba Dinamik Holdings Bhd and Velesto Energy Bhd are backed by strong earnings growth prospects and a visible earnings  turnaround for the latter, which makes it a good trading proposition.

“We also like Kelington Group Bhd for the contribution of its new liquid carbon dioxide plant,” it said.