Impact from devaluation of dong quite small for M'sian firms

  • Business
  • Tuesday, 01 Dec 2009

KUALA LUMPUR: Malaysian construction companies on the stock market continued to be affected by the devaluation of the Vietnamese dong yesterday but analysts said the outlook of the economy is still attractive for investors.

“The impact from the devaluation is quite small for Malaysian companies,’’ said Pong Teng Siew, head of research at Jupiter Securities.

Vietnam devalued the dong by 5.4% against the US dollar late last week, the first time since December last year, as a means to deal with high inflation and a trade deficit. The country also raised its interest rate to 8% from 7%.

A number of construction companies, already reeling from the fallout from the Dubai debt problem, were hurt when news of Vietnam’s action broke.

GAMUDA BHD, WCT Bhd and SP Setia Bhd, which have large projects in Vietnam, took a hit but Gamuda bounced back slightly yesterday after taking a beating last week, closing up five sen to RM2.80. WCT was down eight sen to RM2.44 and SP Setia was 19 sen lower at RM3.51.

“Shakier economic fundamentals in Vietnam have a mild near-term impact on Malaysian companies’ initial investments, but could delay property launches,’’ UOBKayHian said in a note yesterday.

“A weaker dong and a potential further interest rate hike could temporarily dampen property market sentiment, but the longer-term prospects are still good, underpinned by the global economic recovery and Vietnam’s sizeable young population,’’ it said.

Analyst reports indicated that demand for property in Vietnam was still robust as checks with local steel companies showed demand for steel was increasing.

Other companies with construction and property exposure to Vietnam include BERJAYA LAND BHD.

“We do not expect Vietnam to contribute significantly to both Gamuda and WCT’s earnings over the next one year or so,” AmResearch said in a note. “In any case, the dong has already depreciated by some 12% against the ringgit prior to the latest round of devaluation.’’

Analysts also do not think other Asian countries would mirror the action of Vietnam given that inflation and trade deficits are not prevalent in many of the countries.

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