Construction stocks and ringgit likely to be focus

PETALING JAYA: Amidst the easing of fears of political uncertainty, the performance of the ringgit and construction-related stocks is likely to be in focus when markets open on Monday.

The swearing-in of Tun Dr Mahathir Mohamad as Prime Minister and the latest development of more MPs likely to throw their support for the Pakatan Harapan coalition have eased fears of political uncertainty significantly.

The earlier fears of Malaysia going into a situation of a hung Parliament have completely dissipated.

A fund manager said that the best indicator of the easing of fears of political uncertainty is the marginally improved performance of the ringgit.

“The ringgit has stabilised in offshore trading as investors await new developments,” said a curren- cy strategist.

At the latest, the ringgit was at the RM4.06 mark against the US dollar.

The currency strategist also said that as the new Prime Minister announces more developments over the weekend, the performance of the ringgit would strengthen.

Another factor that is in favour of a more stable ringgit is the rising oil price.

As Malaysia is a net exporter of crude oil, the higher average price now helps increases its coffers.

However, some analysts are looking at the ringgit facing weak sentiment when it opens on Monday.

“Market focus is likely to be more on sentiment than fundamentals in the near term.

“As such, the recent rally in crude oil prices may not have significant positive implications for the ringgit and the correlation between the two would likely remain weak in the short term,” said Standard Chartered in its global research report.

Analysts have speculated that construction stocks would come under pressure when the market opens next week because the new government has already said it would review all projects.

According to CIMB Research, Pakatan Harapan will conduct and publish forensic audits on the Government’s financials and off-balance sheet items.

The off-balance sheet items refer to non-government financial enterprises such as Prasarana Malaysia Bhd and MRT Corp that undertake their own funding to carry out projects.

Among the projects that have been mentioned by Pakatan are the Klang Valley Mass Rapid Transit (MRT), the Light Rail Transit (LRT) extension, the LRT 3 line from Bandar Utama to Klang, the Pan Borneo Highway in Sarawak and Sabah, and the proposed Kuala Lumpur-Singapore high-speed rail project.

The focus would be on construction giants primarily Gamuda Bhd, MMC Corp Bhd, Malaysian Resources Corp Bhd (MRCB) and George Kent (M) Bhd that have been at the forefront of undertaking sev- eral railway projects in the Klang Valley.

Gamuda and MMC are the project delivery partners for phase one of the MRT project, while MRCB and George Kent are in charge of the LRT 3 line.

Gamuda is also in charge of the ongoing MRT 2 project.

The other major construction stocks that are involved in mega-construction projects undertaken by the Government are IJM Corp Bhd and Sunway Construction Group Bhd. YTL Corp Bhd is another name that is involved in rail projects.

Among the new favourites are fibre optic cable manufacturer, Opcom Bhd, which is owned by Datuk Seri Mukhriz Mahathir.

Property developer Thriven Global Bhd is another stock as it is controlled by the son of Tan Sri Muhyiddin Yassin.

Market focus is likely to be more on sentiment than fundamentals in the near term. Standard Charted