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PETALING JAYA: Construction stocks gained momentum yesterday, driven by expectations of resumed growth for the sector, as well as the anticipation of the economic stimulus package to be announced month-end.

The Bursa Malaysia Construction Index rose 7.02 points to 211.17 yesterday, led by Gadang Holdings Bhd (+13.6%), Ekovest Bhd (+12.03%), AME Elite Consortium Bhd (+12.3%), WCT Holdings Bhd (+10.2%) and Gabungan AQRS Bhd (+9.9%).

Socio-Economic Research Centre executive director Lee Heng Guie noted that the construction sector had shown a marginal turnaround of 1% during the fourth quarter of 2019.

“The sector has been performing poorly over the past few quarters and growth is still negative on a full-year 2019 basis.

“However, there are expectations that the construction sector will resume its growth, from that 1% in the fourth quarter of 2019.

“This is on the back of major projects being revived, such as the East Coast Rail Link, Pan Borneo Highway and mass rapid transit 3, ” he said.

Figures by the Statistics Department on Wednesday showed improvements in the construction sector during the fourth quarter of 2019 with a marginal growth of 1%, as compared to a negative growth of 1.5% in the third quarter.

The improvement in the sector was backed by a 6.8% growth in civil engineering and a 3% growth in residential buildings.

Lee added that the run-up in construction stocks could also be in anticipation of the economic stimulus package by the government, to cushion the impact of the coronavirus (Covid-19) outbreak that may further dampen the economy.

“The stimulus package is prioritised towards sectors that are directly impacted by the Covid-19 outbreak, such as tourism and service-related sectors, including relevant small and medium enterprises (SMEs), ” he said.

According to AllianceDBS Research, Malaysia’s tourism sector contributes to around 5% of the nation’s total output, fuelling concerns that any adverse impact on the sector could directly translate to a slowdown in gross domestic product (GDP) growth at least in the first quarter of 2020.

The research house believes that the Malaysian economy, which is mainly driven by private consumption, will continue to be well anchored, in light of the already expansionary Budget 2020 and the impending announcement of a fiscal stimulus package.

AllianceDBS Research has maintained its full-year GDP forecast of 4.5% year-on-year for 2020.

Lee said that industry players are hopeful of construction projects to be announced as part of the fiscal stimulus package.

“While the resumption of construction projects has been announced during the tabling of Budget 2020, we do not discount the possibility of more construction projects being rolled out.

“It remains to be seen how the fiscal stimulus package can be implemented and disbursed to sustain private consumption, which is the main driver of domestic growth, ” he said.

Following the Budget 2020 announcement, the construction index rose marginally by 0.19 points to 209.82, although the uptrend did not last long and instead fluctuated.

Meanwhile, Master Builders Association Malaysia president Foo Chek Lee said that in the event that the economic stimulus package entails construction projects, the association is hopeful that it would be smaller-sized projects, where local players stand to benefit.

“Smaller construction projects can be dispersed among the different areas in the country, stimulating the domestic economy in these areas as there are spillover effects on other industries such as logistics and building materials, ” said Foo.The Bursa Malaysia Construction Index saw 29 leaders, six laggards and 15 unchanged yesterday.

https://www.thestar.com.my/business/business-news/2020/02/14/construction-stocks-gain-momentum
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