BOOST SEEN FROM CONSTRUCTION SECTOR

Transportation and storage sub-sector to gain from rebound, says MIDF Research

THERE could be a significant rebound in investment activities and a continuous upward trajectory in domestic consumption in the second half of the year, said analysts.

The construction sector was expected to be much busier, with the positive effects spilling over to the services sector, particularly the transportation and storage sub-sector, they added.

MIDF Research analyst Adam Mohamed Rahim said progress in infrastructure projects such as the East Coast Rail Link (ECRL) and Light Rail Transit 3 (LRT3) would boost spending and investment in the medium to long term.

He said construction activities were expected to pick up in the second half.

“This is because the precast structure would have to be transported to the construction sites,” Adam added.

The services sector accounted for 57.2 per cent of Malaysia’s total gross domestic product (GDP) after expanding 6.1 per cent yearon-year in the second quarter.

Meanwhile, the transportation and storage sub-sector posted the fifth largest growth among the 17 services sub-sectors with a seven per cent year-on-year expansion during the period.

Malaysia’s economy expanded 4.9 per cent in the second quarter, higher than market expectations and analyst forecasts.

The construction sector grew 0.5 per cent year-on-year during the quarter, supported mainly by the civil engineering sub-sector which grew 5.4 per cent year-onyear.

Adam said among the 10 sectors that outperformed Bursa Malaysia’s key FTSE Bursa Malaysia, the KL Construction Index led with a 36.3 per cent year-to-date improvement.

And while the KL Transportation Index has gained only 3.4 per cent thus far, it was a big improvement from last year’s 17.5 per cent decline.

Adam said major developments in the construction sector could materialise from the outcome of the Pan-Borneo Highway in Sabah and the Johor-Singapore Rapid Transit System Link projects, which carry a potential RM12.8 billion and RM4 billion value, respectively.

Affin Hwang has maintained an “overweight” call on the construction sector.

Its analyst said major infrastructure projects would be awarded through an open tender basis for local players.

Meanwhile, Asian Strategy and Leadership Institute Centre of Public Policy Studies chairman Tan Sri Ramon Navaratnam differed with the analysts’ view, adding that the world and Malaysian economies were slowing.

“Although the government is involved in the ECRL project, it may not be sufficient to compensate for the slowdown in economy, which would affect domestic consumption.

“The government is still facing a financial strain as there is a lack of investment in other areas to keep the momentum growing,” he said.

Navaratnam said it was important to encourage the private sector to participate in developing the country’s infrastructure.