Construction sector biggest Budget 2017 winner

budget2017KUALA LUMPUR: Malaysian construction companies stand to gain the most under Budget 2017.

A report in the Nikkei Asian Review (NAR) quoted Affin Hwang Investment Bank analyst Chue Kwok-Yan as saying: “The increase in development expenditure and sustained infrastructure spending is positive for the construction companies, This ensures a healthy pipeline of projects for the construction companies to grow their order books.”

The report also quoted Hong Leong Investment Bank as saying it expected construction growth to remain strong in 2017, buoyed by sustained development expenditure, infrastructure and rural development.

The government announced Friday it would build a 600-km East Coast Rail Line that will cost RM55 billion, and that it would also build and upgrade 616 km of roads and bridges costing RM1.2 billion, among other projects.

Construction remains the fastest-growing activity, although the sector accounts for less than 5 per cent of gross domestic product.

The sector is expected to grow 8.3 per cent in 2017, according to official forecast, supported mainly by infrastructure projects such as the mass rapid transit project in Kuala Lumpur.

Between January and September, construction contracts worth RM49.5 billion had been awarded. This is a record high and more than twice the value of projects awarded in 2015, according to the report.

Beneficiaries of Malaysia’s fiscal largesse in the construction sector include Gamuda, IJM Corporation and Sunway Construction, said UOB Kay Hian analyst Vincent Khoo.

Building materials firms such as steel producer Ann Joo Resources might also benefit from Budget 2017, he added.

The construction index at Malaysia’s stock exchange has risen 3 per cent this month, outpacing a 1.5 per cent gain of the benchmark FTSE Bursa Malaysia KLCI. For this year, the construction index has gained 6.1 per cent, according to the NAR report.

For the past several years, Malaysia has been spending hefty cash to develop and modernise some of its infrastructure to support an economy that grew an average 6.0 per cent annually for the past six decades, NAR reported.

Next year, the Malaysian economy is expected to expand between 4.0 per cent and 5.0 per cent.

Malaysia, the NAR report said, had emerged as one of the most industrialised countries in the region as it channelled part of the cash earned from oil exports to build roads, ports and other massive infrastructure projects, including the iconic Petronas twin-towers.