Construction projects to support economic growth

KUALA LUMPUR:

The government will likely accelerate the implementation of construction projects in the second half of 2020 (H2 2020) to support economic growth in view of external headwinds, says Affin Hwang Capital.

In its securities note today, the research house said that while the government is drawing up an economic stimulus package to counter the negative impact of the Covid-19 coronavirus outbreak on the domestic economy, the spending will likely focus on helping the small and medium enterprise (SME), manufacturing and tourism sectors, which are affected by the outbreak.

“Nevertheless, the increase in development expenditure allocation by four per cent year-on-year to RM56 billion in Budget 2020 and the revival of large-scale infrastructure projects are sufficient to stimulate the construction sector,” it said.

The note also said that the government will accelerate infrastructure spending in 2020 to support economic growth, similar to prior years with economic stimulus packages to mitigate downturns in 2001, 2003, 2008 and 2009.

The research note cited that in May 2003, the government had announced a RM7.3 billion economic stimulus to mitigate the adverse impact of the Severe Acute Respiratory Syndrome (SARS) outbreak, focusing on supporting private consumption and assisting SMEs and tourism-linked businesses.

Among the large-scale infrastructure projects to be revived, the Johor Bus Rapid Transit, Rail Transit System, and Pan Borneo Highway Sabah projects will likely kick off this year.

Other large-scale projects such as the Klang Valley MRT Line 3, Penang Transport Master Plan and KLSingapore High Speed Rail could see news flow on a potential revival in 2020.

“We maintain our overweight call on the construction sector, with top buy on Gamuda, SunCon, AQRS and HSS, AME Elite Consortium, Pintaras Jaya and Taliworks,” it said. — Bernama