DESPITE being a long term positive, the 12th Malaysia Plan (12MP) is unlikely to bring immediate market excitement which hinges on the reopening momentum.
While carbon neutrality appeared to be a noticeable theme (benefitting renewable energy and electric vehicle sectors), construction – a favourite in past MPs – there was unfortunately no mention of new mega projects like the Mass Rapid Transit Line 3 (MRT3), according to Hong Leong Investment Bank (HLIB) Research.
“At the onset, the 12MP’s targets seem realistic but we are cognisant there could be longer term implementation risk as manoeuvring the next half decade in an endemic won’t be a walk in the park,” justified head of research Jeremy Goh and team in a 12MP review.
“While we are positive of the construction sector’s headline development expenditure (DE) sum of RM400 bil which is a 61% increase from 11MP, this typically translates to smaller to mid-sized jobs as mega projects tend to be funded “off-budget”.
PublicInvest Research expects short-term market reaction to be muted given current pre-occupation with domestic political conditions (though this has found some manner of peace for now) and the COVID-19 infection rate (which remains relatively high though now seeing a downward trajectory).
“In all fairness, 12MP appears to be more skewed toward socio-economic development for longer-term sustainability and prosperity if compared to previous editions, hence direct market reaction expectedly more subdued,” observed the research house.
“Customary brick and mortar beneficiaries like the construction and infrastructure sectors are noticeably lacking this time round with the 12M shifting towards digital-based infrastructure as drivers of future growth.”
In a nutshell, the 12MP will focus on eight industries that are expected to catalyse economic growth in the next half-decade – electronics and electrical (E&E), global services, aerospace, creative, tourism, halal, smart farming and biomass.
Special mention was also made regarding the need for a comprehensive transformation of the water sector, strengthening of telecommunications services and transforming the logistics ecosystem for greater efficiency.
Although it is “slightly positive” on the 12MP with potential beneficiaries being the technology, construction, water and renewable energy players, CGS-CIMB Research is disappointed by the lack of details on the prospects of new mega project roll-outs in 2022.
“The plans to introduce multi-tier levy mechanism, carbon tax and cap foreign workers in the workforce may lead to higher costs for businesses dependent on foreign workers and negatively affected by carbon taxes in the medium to long term,” opined head of research Ivy Ng Lee Fang.
“It is unclear if these costs can be passed on to consumers. Pending details on the equity safety net framework, it is unclear if this could impact M&As (merger and acquisitions) in the equity market.” – Sept 28, 2021
Pic credit: Flickr
