PETALING JAYA: Malaysian investors are advised to rotate into domestically driven growth stocks while maintaining exposure to energy-related counters as a hedge against the risk that a fragile US-Iran diplomatic breakthrough could unravel over the next two months.
In a thematic strategy report, BIMB Securities Research said the signing of a US-Iran memorandum of understanding (MoU) on June 17 marked a turning point in the 110-day Strait of Hormuz conflict, reducing immediate geopolitical risks and allowing markets to shift focus away from wartime positioning.
The agreement, which formalises a ceasefire and outlines steps towards restoring energy transit through the Strait of Hormuz, has helped trigger a global relief rally after months of market turbulence caused by supply disruptions that pushed Brent crude above US$120 a barrel.
According to BIMB Securities Research, the conflict had stranded almost one-fifth of global oil supply, fuelling fears of stagflation and forcing governments and investors to reassess energy security risks.
The brokerage highlighted several key provisions in the MoU, including a permanent ceasefire, the reopening of maritime routes and temporary toll-free access through the Strait of Hormuz.
“The MoU mandates a ‘permanent termination of military operations’ on all fronts, explicitly including the Lebanon theatre.”
In addition, the research house said commercial vessels are granted toll-free transit through the strait for a 60-day period.
The agreement also includes economic concessions and nuclear commitments from both sides.
“The United States will issue Treasury waivers for Iranian oil, petroleum, and derivative exports, alongside the release of frozen Iranian assets,” the brokerage noted.
At the same time, Iran has agreed to a supervised process of reducing its enriched uranium stockpile and has reaffirmed its commitment not to develop nuclear weapons.
Despite the positive market reaction, the brokerage cautioned that the MoU remains an interim framework rather than a final settlement, with several contentious issues deferred to a 60-day negotiation window.
Among unresolved matters are future nuclear enrichment limits, ballistic missile development, sanctions removal and the long-term governance of the Strait of Hormuz.
“The current MoU contains no restrictions on Iran’s ballistic missile development – a key point of contention for the region,” the report said.
BIMB Securities Research believes the next two months represent a high-risk negotiation phase, assigning a 35% probability to a breakdown in talks, compared with a 50% chance of gradual normalisation and only a 15% probability of a comprehensive breakthrough.
One major risk stems from the agreement’s dependence on compliance verification.
“A major risk point is that sanctions relief is explicitly tied to performance on nuclear goals,” the report said, warning that any adverse findings from the International Atomic Energy Agency (IAEA) could trigger renewed sanctions and a resurgence in market volatility.
Against this backdrop, BIMB Securities Research recommends a “defensive barbell” investment strategy.
The approach allocates 35% of a portfolio to defensive positions, including into counters such as Hibiscus Petroleum Bhd
and cash reserves, while directing the remaining 65% towards domestic growth and infrastructure themes.
The brokerage said Malaysia’s market is increasingly being driven by local catalysts, particularly projects linked to the 13th Malaysia Plan and the rapid expansion of hyperscale data centres.
The research outfit also noted a growing shift in investor capital away from commodity beneficiaries and towards companies with strong domestic order books.
“Because domestic infrastructure is essential to our economy, these projects remain largely insulated from the vagaries of the Strait of Hormuz,” BIMB Securities Research pointed out.
Among its other preferred stocks are Sunway Construction Group Bhd, Telekom Malaysia Bhd, Tenaga Nasional Bhd, Pharmaniaga Bhd and Velesto Energy Bhd.
Looking ahead, BIMB Securities Research said investors should closely monitor developments in the ongoing Switzerland-based negotiations, IAEA inspection reports and regional proxy activity.
“Should feedback from the Switzerland negotiations turn negative, our directive is to immediately reduce high-beta exposure to preserve capital and revert to our insurance leg until market conditions stabilise.”
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