Fitch: Political crisis could impact infrastructure plans


  • Economy
  • Thursday, 27 Feb 2020

“The current situation, in our opinion, does not bode well for short-term growth prospects of the overall construction industry, as once again, investors, especially those of foreign origin, will likely put a hold to investments plans and wait out for more clarity on the political situation in the country, ” Fitch said. The fate of suspended infrastructure projects, such as the Kuala Lumpur-Singapore High Speed Rail (HSR) project and the MRT 3 Circle Line project, continue to hang in the balance.

PETALING JAYA: Malaysia’s current political crisis has thrown a spanner in the works for the country’s construction sector, which is slated for the rollout of several mega projects in the coming months.

The unexpected resignation of Prime Minister Tun Dr Mahathir Mohamad, which led to the Cabinet being dissolved, has resulted in the departure of key policymakers including the Transport Minister as well as Finance Minister.

Fitch Solutions expects that the country’s infrastructure development plans could now once again be impacted, depending on the political developments in the coming days and weeks.

“There is a possibility for the reappointment of some of these ministers in the next cabinet, but we note that infrastructure policy could be ultimately be altered either for the better or the worse for the sector, ”it said in a report.

The research house noted that Dr Mahathir’s wavering stance on several big-ticket infrastructure projects had previously raised investor concerns and increased the level of project risk in Malaysia.

“The current situation, in our opinion, does not bode well for short-term growth prospects of the overall construction industry, as once again, investors, especially those of foreign origin, will likely put a hold to investments plans and wait out for more clarity on the political situation in the country, ” it said.

The fate of suspended infrastructure projects, such as the Kuala Lumpur-Singapore High Speed Rail (HSR) project and the MRT 3 Circle Line project, continue to hang in the balance.

There is also uncertainty about other current and future government infrastructure projects, as well as deals such as the RM6.2bil planned government takeover of four highways from GAMUDA BHD – for which the deadline is this Friday.

Fitch Solutions said it awaits more clarity on the current political situation before revising its forecasts for the sector.

Affin Hwang Capital Research recently downgraded the construction sector to “underweight” from “overweight” in view of the political turmoil, saying that the sector was susceptible to changes in government policies and delays in public-sector project awards.

Its previous “overweight” call, it said, was premised on expectations that the government will accelerate development expenditures and revive some large-scale infrastructure projects, such as the Johor Bus Rapid Transit, Rail Transit System, Pan Borneo Highway Sabah, MRT3, and the Penang Transport Master Plan.

“However, the potential change in leadership or government could lead to further delays in rolling out the infrastructure projects, ” it said.

It downgraded Gamuda to “sell” from “buy” previously, and HSS Engineers Bhd to “hold” from “buy, with Sunway Construction its preferred exposure to the sector.

“The construction companies are reliant on public sector projects to replenish construction order books as construction demand from the property sector remains weak, ” it said.

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