Construction set to rebound on strong demand

PETALING JAYA: Malaysia’s construction sector is expected to regain momentum in the second half of this year, underpinned by improved project execution, a robust pipeline of infrastructure and industrial developments, and strong demand for data centres.

MIDF Research maintained a positive outlook on the sector, citing a favourable cost environment and healthy job flows.

“Steel bar prices have continued to ease for the second consecutive month, while cement prices remain stable due to disciplined domestic production and raw material cost control,” the research house said, adding that this cushioned contractors from margin pressures.

Additionally, while geopolitical risks such as US tariffs and conflict in the Middle East pose broader market volatility, MIDF Research highlighted that local construction players had low direct exposure to these regions.

“We see limited impact on the sector given its domestic focus and low direct exposure to the United States and Middle East markets.”

Key drivers for the sector included diversified earnings bases, asset monetisation strategies and operational efficiencies across major players.

“Our optimism is anchored by several key factors,” it said, pointing to ongoing infrastructure work and stronger activity in property development.

The research house’s top sector picks include Sunway Construction Group Bhd (SunCon), IJM Corp Bhd, Gamuda Bhd, and Malayan Cement Bhd.

It highlighted SunCon’s RM3.93bil worth of data centre projects, IJM’s active bidding in data centre tenders, and Gamuda’s strong execution track record.

“We expect data centres to be one of the main drivers of growth in the construction industry in Malaysia this year,” MIDF Research noted.

Private-sector investments and existing projects such as the East Coast Rail Link and Rapid Transit System Link will continue to support the sector amid a slow rollout of mega public infrastructure under Budget 2025.

The upcoming Johor-Singapore Special Economic Zone and foreign investments in data centres also signal positive long-term prospects.