Dubai financial crisis has affected our stock market on 30 November 2009. Counter related to Dubai project were affected. What is advise of OSK on the said counters. Read the article below;
Good time to buy shares of contractors: OSK
THE recent share price retracement of Malaysian contractors should provide a good chance to accumulate, said OSK Research.
OSK, in its research note, said it expected a continuous positive news flow fuelled by more domestic contract awards with the Low-Cost Carrier Terminal project the first to take off with the earthworks package awards.
"We see the recent share price pullback as an excellent opportunity to accumulate and will retain the 'Overweight' stance on the construction sector," it said.
OSK said share prices of Malaysian contractors had declined in the past week on interest rate increase and currency devaluation in Vietnam as well as the Dubai's debt issue.
It said among the counters affected were Gamuda Bhd, which fell by 9.7 per cent, IJM Corp Bhd (3 per cent), WCT Bhd (6.3 per cent) and Mudajaya Group Bhd (8.6 per cent).
OSK said the rate increase and currency devaluation were likely to weaken sentiment in the Vietnamese property market in the short term.
"However, we believe long-term prospects in the Vietnamese property market will remain positive, underpinned by the nation''s robust gross domestic product," OSK said.
It said the Dubai issue would not impact Malaysian contractors much given the minimal exposure, with only IJM undertaking a RM126 million contract for the Fortune Executive office towers.
"Meanwhile, WCT-Arabtec joint venture is undergoing arbitration, which is expected to be completed by end-2010, with Meydan LLC in Dubai for the Meydan Racecource termination," it said.
OSK said LCL, however, was highly exposed as it has 85 per cent of its orderbook exposed to Dubai. -- Bernama
4 comments:
i don't quite understand,what is the rationale and relation between the construction company performance with interest rate increase and currency devaluation in Vietnam as well as the Dubai's debt issue?can u explained on that?
Most of the project in Dubai are undertaken by UAE government via their GLC namely Dubai World (DW). Since DW facing huge debt now, there is anxiety the project will be postpone and will jeorpadise performance contructions company like IJM, WCT ect as those companies are contractors for DW.
Increase in interest rate will affect the income of construction company as their project financed by loan, therefore the cost of loan getting higher.
For Vietnam currency devaluation, it is only triggered phycological effect. Investors worry it will create domino effect like what had happended in 1997 when bangkok was attacked by currency trader.
thank you so much for the explaination master sabri. now i can see the clear picture of what has happened to the industry.
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