Mixed reactions from constructors following SST announcement

KOTA KINABALU: The prices of construction-related stocks saw mixed performance yesterday following the Finance Ministry’s announcement on the tax exemption of some construction materials.

At closing, construction giants Mah Sing Group Bhd, Eco World International Bhd and Sunway Construction Group Bhd remained flat.

Meanwhile, IOI Properties Group Bhd fell four sen to RM1.81 per share, Gamuda Bhd’s shares dropped four sen to RM3.65, SP Setia Bhd shares dipped five sen to RM2.95 sen, and UEM Sunrise Bhd fell five sen to 95.5 sen.

In a media release, Finance Minister Lim Guan Eng said that the pressure on house prices, industrial and commercial buildings is expected to ease with the abolition of the Goods and Services Tax (GST) and exemption from SST.

He also said the federal government hoped that construction costs will be lowered with the SST exemption on main building materials and construction services.

Examples of building materials which will not be subject to SST are cement, sand and iron.

The SST has been projected by analysts to give a breather to the construction and steel sector.

“If it takes place, the construction sector is expected to take a breather from the grim outlook that impacts the industry from project cuts,” the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) noted in a special update on the steel sector. “The steel and construction sector are interconnected as the former relies heavily from the building material demand from the latter’s project activities.

“SST will enable steel sector to maintain its product supply to construction sector without any additional cost.”

Meanwhile, MIDF Research also highlighted that the Malaysian steel sector is expected to experience more headwinds from the trade wars.