Strait tensions easing, Morgan Stanley strongly promoting these three sectors

The possibility of the Strait of Hormuz reopening has recently become the most concerning topic for investors—everyone is pondering how to layout the energy, chemical, and power sectors in the Asia-Pacific region, taking advantage of the industry recovery. The latest research report has given a clear direction: the tension in the downstream energy and power sectors is seriously underestimated by the market, and the three sectors of chemicals, power, and oil refining and retail are very likely to become the "hot commodities" in the recovery cycle.

Most investors now take for granted that "oil prices will fall," but fail to notice the tension in the downstream energy supply chain—this is similar to the situation during the recovery after the pandemic. Once conflicts are eased, the recovery speed of downstream industries may be much faster than expected. However, it is important to be vigilant about the risk of fuel demand contraction, but the demand in the chemical, electric power, coal, and fertilizer supply chains is relatively strong and is also the focus of long-term capital layout.

From the movement of institutional funds, it can be seen that long-term investors pay the most attention to the chemical and power sectors, while hedge funds prefer oil retailers and refiners, with a focus on core Asia-Pacific markets such as India, Thailand, and Malaysia. It is worth noting that after the deep adjustment from 2024 to 2025, the chemical industry has bottomed out and recovered, coupled with plastic shortages, tight supply of naphtha raw materials, and continued capacity contraction, more and more investors are beginning to pay attention to enterprises that can "stand firm" in the recovery cycle.

Specific to sector allocation, the cyclical recovery opportunities in the chemical field are the most noteworthy. In the short term, enterprises related to naphtha will benefit first in "open trading," followed by ethane-based producers in the Asia-Pacific region, such as PTT Global Chemical, Petronas Chemicals, and Reliance Industries, all of which are key focus objects. In addition, the polyethylene (PE), polyvinyl chloride (PVC), and para-xylene (PX) industry chains are also the most valuable sub-sectors for allocation, with Siam Cement, Indian Oil, and INEOS Group being key targets in the eyes of institutions.

The investment enthusiasm in the power, coal, and battery sectors is also gradually rising. Although renewable energy remains the core direction of energy security, Morgan Stanley has proposed a noteworthy model—the combination of coal and batteries to support the basic power supply, which has attracted widespread market attention. Independent power producers in Singapore, Thailand, and the Philippines, as well as coal equipment companies, have all ushered in layout opportunities. In addition, Japan, India, and other countries are adjusting energy security-related policies, which will further affect the collaborative development pattern of coal, natural gas, and batteries.

The structural tension in the oil refining and fuel retail sectors should not be ignored either. From an industry logic perspective, complex refiners will continue to benefit—simple refiners have seen a decrease of about 10% in the availability of crude oil. As the crude oil premium falls slowly with transportation recovery, it is probable that the profit margins of complex refiners will exceed market expectations. Companies such as Thai Oil, Hindustan Petroleum, and Bangchak Petroleum are considered favorable by institutions. Moreover, within the past 45 days, most Asia-Pacific countries have controlled fuel prices, which has also made the risk of demand contraction lower than expected. Only the aviation fuel sector has been relatively affected, similar to the market situation after the 2022 oil crisis.

From an industry trend perspective, although the market generally believes that oil prices will move downward, the tension in the downstream supply chain will support the valuation repair of related sectors. For investors, the most critical aspect now is to break away from the "single driver of oil prices" mentality and focus on three types of targets: first, chemical companies with cyclical recovery potential; second, electric power and coal companies that benefit from energy security policies; and third, oil refining and retail merchants with structural advantages, seizing the opportunities for sectoral allocation under the expectation of the Strait of Hormuz opening.