Consumers, construction among sectors heavily impacted post-GE14
KUCHING: Consumer and construction are likely to be the most largely impacted sectors following the 14th General Election (GE14) pending updates of the new government’s policies moving forward.
MIDF Amanah Investment Bank Bhd (MIDF Research) anticipated a mixed sectoral impact as the Pakatan Harapan manifesto affects sectors in different ways.
“The move to review mega projects is short term negative for the construction sector — but we think that existing projects that are underway will be run as normal although we don’t rule out the possibility of the review of the costs involved,” it said in a post-mortem note on GE14.
“Meanwhile, the measures to improve the people’s well-being including removal of Goods and Services Tax (GST) and tolls, and lowering of car prices are expected to improve consumer sentiment and domestic demand which bodes well for the consumers and automotive sectors.”
Affin Hwang Investment Bank Bhd (AffinHwang Capital) shared the same sentiment, noting that the removal of the GST could be positive for domestic demand and consumption spending.
This came as consumer sentiment was negatively impacted post GST and has only recently started to recover towards the end of 2017, it said.
“With a reinvigorated middle-income segment, the propensity to spend on big-ticket items, particularly on passenger vehicles – which has seen muted sales over the past two years – and overall consumer spending is highly likely,” it said in a separate report.
“For construction, we expect negative near-term performance due to contract uncertainties and project delays such as the Klang Valley MRT Line 3 (MRT3), Gemas-Johor Bahru Electrified Double Tracking (EDT) and Kuala Lumpur-Singapore High Speed Rail (HSR).
“Projects awarded to Chinese contractors, such as the RM55 billion East Coast Railway Link and RM9 billion Electrified Double Track projects, will also be reviewed.”
In this near-term market volatility, AffinHwang Capital believed that there would likely be rotation into defensives such as healthcare and potentially high-yielding plays such as Malaysian REITs.
However, post this short-term shock, it expected focus to be on the stronger middle-income segment, and thus benefiting the consumer and the auto and autoparts subsegment.
AffinHwang Capital advocated for buying on weakness for small and mid-caps stocks.
“We would also be inclined to increase our positioning in the small/mid-cap space after the sell-down in recent months,” it said. “As valuations turn more compelling, we think that focus should return to this space given stronger growth prospects and relatively more attractive valuations.”
Source: Borneo Post Online