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Monday, June 30, 2008

Construction sector seen as main loser

PETALING JAYA: The mid-term review of the Ninth Malaysia Plan (9MP) reveals that the construction sector appears to be the main loser due to cutback in spending.

CIMB Research in an update report said the review was neutral on most sectors as there were no strong commitments to spend on them.

“Food and beverage, oil and gas and building materials (sectors) were marginal winners,” it said.

A woman walking past a poster in George Town. The removal of both the Penang Monorail and Penang Outer Ring Road projects from the 9MP allocation was negative for the construction sector.

CIMB Research said the RM30bil increase in development expenditure to RM230bil was positive over the next 12 months for the building material sector, as part of the expenditure would address rising cost of materials.

“However, in the longer term, the outlook for building material demand is less optimistic given the reduction in construction spending,” it added.

The removal of both the RM2bil Penang monorail and RM1.5bil Penang Outer Ring Road project from the 9MP allocation was negative for the sector and outweighed the potential positives arising from the additional development budget, the research house noted.

CIMB Research remains “overweight” on the oil and gas sector due to the current overriding demand for energy but is “neutral” for the plantation sector.

“The Government's policy of expanding arable land and increasing food production, in view of the global increase in food prices, are expected to have minimal impact on the listed oil palm players in Malaysia,” the report said.

While it maintains its “overweight” rating for the telecommunications sector, CIMB Research has reduced its target price for Telekom Malaysia Bhd as it remains negative on the rate of penetration for the household high-speed broadband project.

“Although continued efforts would be made to push household broadband penetration to 50% by 2010, affordability and demand for such speeds from most residential customers are likely to be limited,” it said.

The research house noted that VADS Bhd and JobStreet Corp Bhd were clear beneficiaries in the technology sector as the review envisaged an increase in exports from Multimedia Supercorridor companies and an increase in information and communications technology (ICT) global players' investments in high-valued outsourcing.

“On VADS' part, it harbours the aspiration of being a local ICT champion while its core divisions should benefit from increased transactional flow from shared service outsourcing. Meanwhile, JobStreet will see a positive impact from the creation of more jobs,” it added.

By The Star (by Laalitha Hunt)

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