MRT, HST cancellation dampens property outlook
KUCHING: The cancellation of several projects such as the Mass Railway Transit (MRT) 3 Circle Line and the High Speed Railway (HSR) connecting Singapore and Malaysia will will have a negative impact on developers who have invested in projects surrounding those localities.
AmInvestment Bank Bhd (AmInvestment Bank) in a sector outlook yesterday opined that the cancellation of the MRT 3 Circle Line would affect certain locations in Kuala Lumpur as they will become less popular without an MRT station.
The MRT 3 line, which was planned to run along the boundary of the Kuala Lumpur city centre, would have included Ampang Jaya, Kuala Lumpur City Centre, Jalan Bukit Bintang, the Tun Razak Exchange, Bandar Malaysia, KL Eco City, Pusat Bandar Damansara, Mont’ Kiara and Sentul.
“The cancellation of the MRT 3 will hit developers who acquired and planned developments along the line,” it affirmed. “Nonetheless, these areas are mostly matured townships and the impact will not be too significant.
“The government’s decision to scrap the HSR will have a negative impact to developers who have invested on projects that were supposed to be close to the stations such as Bandar Malaysia, Putrajaya, Melaka, and Iskandar Puteri.
“Additionally, the sudden resignation of Bank Negara Malaysia’s governor and the change in several governmentlinked corporate heads is also expected to add uncertainty to the domestic bond market.
“Meanwhile, rising expectations of US Fed rate hike is expected to weigh on regional bond markets.”
The research arm added that the average 10-year Indonesian bond yield jumped to 7.18 per cent in May from 6.7 per cent in April while India’s average 10-year bond yield has climbed to 7.78 per cent, compared to 7.51 per cent in April.
That said, Kenanga Research pointed out that the issue of the new benchmark 20-year Malaysian Government Securities ( MGS) successfully drew a good demand, signalling that investors remain confident of the long-term outlook of the local bond market.
Additionally, the research arm expected a gradual relaxation of the forex administration rules implemented during the former BNM governor’s time to lure foreign capital.
Hence, the research arm retained its view for the current capital flight to continue in the second half of 2018 ( 2H18) before capital flows stabilises.
“As such, we remain optimistic of the long-term capital flow outlook which would provide BNM the flexibility to retain its Overnight Policy Rate at 3.25 per cent to accommodate growth and meet its 5.5 to six per cent economic growth target for this year.”