BURSA-LISTED builders are expected to have a challenging year ahead on the back of weak demand and a shortage of new public mega projects, AmInvestment Bank Research said.
“We maintained underweight for the building material sector. Locally, the sector continues to be weighed down by weak demand (the discrepancy between the news flow on the revival of mega projects, and in reality, the absence of sizeable new public infrastructure projects up for bidding), excess supply (particularly, steel from a new foreign-owned plant in Kuantan) and policy risks (for instance, the government recently shot down a plan by the producers to raise cement prices).
“On the global front, China plans to raise steel production in 2020 despite slowing domestic demand. For aluminium, the steady consumption growth in China in 2020 will be more than met by the production growth,” the research house said in its Dec 10 sector note.
For next year, AmInvestment is projecting an average steel bar price of RM2,000/tonne (revised down from RM2,100/tonne), average cement price in Peninsular Malaysia of RM195/tonne (revised up from RM190/tonne) and an average aluminium price of US$1,850/tonne (relatively unchanged from US$1,870/tonne).
There might be a possible re-rating of the building materials sector to neutral if the government decided to embark on pump-priming initiatives “in the event of external shocks such as an unexpected slump in the global economy,” said AmInvestment
