With not less than $323 billion of infrastructure investment in Southeast Asia and potential further growth expected over the following few years, 2018 could prove to be the 12 months for construction stocks from Indonesia to the Philippines, which have lagged the broader market rally this 12 months.
Governments are increasing spending on all the things from airports to high-speed rail and ports to spice up connectivity and spur economic growth, which guarantees to profit construction corporations within the region.
Below is a summary of country plans and investor views on Southeast Asia’s infrastructure spending spree, as summarized by Bloomberg:
Philippines
- The government earmarked about 1 trillion pesos ($20 billion) for infrastructure within the 2018 budget as a part of Duterte’s six-year, $180 billion infrastructure program to construct a network of railways and highways across the archipelago.
- Tax reform will help finance infrastructure projects; construction and infrastructure-related stocks will outperform in 2018, said Noel Reyes, who helps manage $1 billion as chief investment officer at Security Bank Corp.
- The tax reform bill is awaiting approval by Congress and is one in every of the primary five tax packages proposed by Duterte to boost taxes to fund infrastructure projects
- The infrastructure program includes 70 projects starting from railways, airports, roads and bridges, cities, ports and mass transit, to be implemented during Duterte’s six-year term as president
- Construction and Infrastructure Companies: Metro Pacific Investments Corp., Megawide Construction Corp., Ayala Corp., EEI Corp.
Indonesia
- Indonesian Finance Minister Sri Mulyani Indrawati has announced over 240 infrastructure projects
- According to the Ministry of Public Works and Public Housing, the country needs 931 trillion rupees ($69 billion) for infrastructure spending between 2015 and 2019; only 528 trillion rupees was allocated for this purpose during this era
- Concerns about financing availability and financial risks amongst Indonesian infrastructure corporations have led to a decline in construction stocks this 12 months
- Shares of PT Waskita Karya, the country’s largest listed construction company, fell 27 percent in 2017, at the same time as the Jakarta Composite Index hit a record high in November
- The largest construction corporations: PT Jasa Marga, PT PP Persero, PT Waskita Beton
Malaysia
- Malaysia has earmarked 210 billion ringgit ($51.6 billion) for projects in its 2018 budget, 73 percent of which is able to go to rail and public transport
- About 55 billion ringgit has been earmarked for the East Coast Rail Link, 50-60 billion ringgit for the Kuala Lumpur-Singapore high-speed rail and 40 billion ringgit for Phase 3 of the mass rapid transit system
- Rail, inexpensive housing, roads and water infrastructure are the most important segments that may profit from government spending next 12 months, wrote Sharizan Rosely, an analyst at CIMB in an Oct. 30 report
- The general election might be held in August 2018.
- Major construction corporations: Gamuda Bhd., IJM Corp. Bhd., Sunway Construction Group Bhd., Malaysian Resources Corp. Bhd.
Thailand
- The government has pledged to spend 1.5 trillion baht ($46 billion) over the following five years to spice up economic growth through infrastructure spending to develop three eastern provinces under the Eastern Economic Corridor
- Infrastructure spending will remain a key driver of the economy and recent development projects corresponding to the EEC, said Orsen Karnburisudthi, a Bangkok-based senior investment manager at Aberdeen Asset Management Co.
- The EEC envisages the transformation of the province into technological manufacturing and repair centres with strong land, sea and air connections with the assistance of private and non-private financing in addition to foreign direct investment.
- The election might be key to economic growth and business sentiment, Aberdeen said; Prime Minister Prayuth Chan-Ocha said in October the vote can be held in November 2018.
- Bank profits will rise as economic growth boosts credit growth and reduces provisions for bad loans, while shopping center operators and retailers will profit from a recovery in consumption, Orsen said.
- Major players in the development market: Italian-Thai Development Pcl, CH. Karnchang Pcl, Unique Engineering & Construction Pcl, Sino-Thai Engineering & Construction Pcl; EEC beneficiaries: Amata Corp. and WHA Corp.
Vietnam
- Vietnam has earmarked VND150 trillion ($6.6 billion) for infrastructure development between 2016 and 2020 and still needs $480 billion to finance investment by 2020, in accordance with the Ministry of Planning and Investment.
- Key infrastructure projects include a 1,800-kilometer, $13 billion highway from Hanoi within the north to Ho Chi Minh City within the south, the biggest road project within the country’s history
- Major infrastructure players: Songda Urban, Ho Chi Minh City Infrastructure, Coteccons Construction, Ha Do JSC, Song Da No. 9 JSC
Singapore
- As the one developed market in Southeast Asia, Singapore is less exposed to the identical level of presidency infrastructure spending as its neighbours
- While among the key projects for 2018 include a brand new Changi Airport terminal, an enormous transshipment port and the KL-Singapore high-speed rail, the country’s stock market is prone to profit more from a recovery within the property sector and the general economy
- Analysts including Ling Lee Keng wrote in a Dec. 5 note that DBS Group Holdings Ltd. expects property prices to grow at a rate of three percent to five percent annually over the following two years, supporting shares of small and mid-sized construction and real estate corporations corresponding to Chip Eng Seng Corp. and APAC Realty Ltd.
- Singapore’s economic recovery in 2018 also prolonged from manufacturing to the services sector, which accounts for about two-thirds of gross domestic product
Source: Bloomberg
