Construction stocks listed on Bursa Malaysia have seen a notable surge in interest and performance this year, as reported by The Edge Weekly. The KL Construction Index has experienced a remarkable year-to-date (YTD) increase of 20.52%, reaching a two-year high and outpacing the FBM KLCI.
This growth is particularly noteworthy given the challenges many construction firms face due to a relatively low number of awarded contracts in the current year.
The report, quoting the Master Builders Association of Malaysia (MBAM), said the contract wins in Malaysia’s construction sector amounted to RM78 billion as of September, with a year-end target of RM150 billion.
This projection exceeds the previous year’s total of RM130 billion. However, the industry was running two months behind schedule regarding contract awards, and annualised figures indicate that the total contracts for 2023 may be 20% lower than in 2022, reaching RM104 billion.
One key factor driving optimism in construction stocks is the government’s announcement of the development of Johor as a special economic and financial zone. Investors have been particularly attracted to companies poised to benefit from this development.
In July, Minister of Economy Rafizi Ramli and Singapore’s National Development Minister Desmond Lee made a significant announcement regarding the establishment of a special task force. This task force was convened with the specific purpose of conducting a comprehensive study on the creation of the Johor-Singapore Special Economic Zone (SEZ).
Subsequent to this impactful announcement, there was a notable upswing in the share prices of companies associated with the region, commonly referred to as “Johor counters”. This surge in share prices reflects the growing enthusiasm and investor confidence in the potential economic prospects and opportunities arising from the development of the Johor-Singapore SEZ.
Notable gainers in this regard include Ekovest Bhd, UEM Sunrise Bhd, and Iskandar Waterfront City Bhd (IWCity). Ekovest’s share price, for instance, surged over 62% YTD to 57 sen, while UEM Sunrise and IWCity witnessed YTD increases of 250% and 177.78%, respectively.
