PETALING JAYA: Despite investments in data centres providing a boost to the local economy, the overall banking sector is not poised to be a prime beneficiary of the boom.
Hong Leong Investment Bank (HLIB) Research said it did not expect banks to gain significantly from the current wave.
“While we acknowledge the potential economic benefits of such investments, we do not see total approved investment spike in the past translating into meaningful private nominal gross fixed capital formation growth.
“In any case, big foreign data centre companies have alternative funding sources like going into the debt capital market, balance sheet of cash-rich parent companies and the international finance corporations to start their projects.
“Also, for more than a decade, we saw some banking disintermediation taking place with new corporate debt capital issuance creeping up,” the research house noted, while maintaining its “neutral” call on the sector.
Malaysia’s total investments have shot up over the last three years between 2020 and 2023, with a compound annual growth rate of 26%, underpinned by the electrical and electronics segment and proliferation in data-centre demand.
According to the Investment, Trade and Industry Ministry, approved digital investments (DIs), which comprised primarily of data centres (79%), had grown to RM141.3bil in the 2022 to 2023 period from RM3.4bil in 2021.
For perspective, DIs make up only 1% of total investments in 2021 and they ballooned to 24% in the 2022 to 2023 period, according to the research house.
As for construction, HLIB Research pointed out that it made up a small proportion of loans (at 5%) and assuming it increased by 20%, it would only add a meagre one percentage point rise to overall credit growth.
