Construction sector to peak by 3Q to 4Q2010

KUALA LUMPUR: The construction sector is expected to peak between the third and fourth quarter of this year on the anticipation of a full rollout of three mega projects, says HwangDBS Vickers Research.

The mega projects are the RM2 billion Low Cost Carrier Terminal, to be sited about 2km from the KL International Airport in Sepang, Pahang-Selangor Water Transfer and Light Rail Transit (LRT) extensions.

The sector may show continuity in 2011, depending on the speed of the rollout of other mega projects like the new LRT lines and the pace of the new orderbook wins, it said.

"We expect further outperformance with the new leadership paving the way for more aggressive contract flows and prudent cost management. The foreign contract inflows are added catalysts. We expect Middle East countries and India to be the focus markets," it said in a statement.

The research house also views positively the participation of contractors from China in the mega projects and the spillover effects for the locals.

Private Finance Initiatives and public-private partnerships are expected to play a bigger role as the government had allocated RM7 billion for the purpose under the second stimulus package, it said.

It said the private sector would likely provide the bulk of the financing while the government made available basic infrastructures to ensure project viability.

To spur private sector involvement in economic corridor development, the government had set aside RM3.5 billion this year for infrastructure and basic amenities in the corridor regions, it added. -- Bernama