• Still O/W. Following the conclusion of the US presidential election, we expect US-China trade tensions to continue (or intensify). The South-East Asian (SEA) region is in a sweet spot for global trade and is likely to see increased foreign direct investments (FDI). During “Trump 1.0” in 2017-2021, we saw a significant increase in expansions and relocation of manufacturing activities from East Asia and European countries to this region. Malaysian developers with strategic exposure to the industrial segment should benefit. Top Picks: Sime Darby Property (SDPR), Mah Sing, Sunway, and UEM Sunrise.

• What happened during Trump 1.0. During Donald Trump’s previous presidential term, many developers in Malaysia with industrial park developments (the major ones in Johor are i-Park and Nusajaya Techpark) experienced a sudden surge in demand for industrial land plots and factories, as many global companies chose to expand or relocate to SEA to avoid the potential “interruptions” from the US-China trade war. Demand picked up even more aggressively after the COVID-19 era due to decentralisation of production for risk mitigation. Therefore, after the conclusion of the US Presidential Election yesterday, we expect trade tensions to continue, and hence, FDIs should continue to pour into Malaysia from East Asia and Europe, and perhaps (to a lesser extent) from the US. Depending on the extent of the potential tariffs imposed by the US in the next few years – while certain industries may be affected– we think overall multinational companies will still find SEA a desirable investment destination for their expansion plans in Asia. Apart from our Top Picks, Eco World Development (ECW MK, NR) and IOI Properties also have exposure to the industrial development segment.

• Impact on data centre (DC) investments. We do not think DC investments in Malaysia will be affected. Fundamentally, given Malaysia’s neutral political stance, the country is still well-positioned as a location of choice for DCs. The key reasons that Malaysia has been able to attract many DC investments over the last few years are its geographical location, readily available fibre infrastructure, and relatively cheaper land and resources. Hence, companies that are involved in DC investments such as SDPR and Mah Sing should continue to attract more demand (and offtakers) in the future.

• Prefer developers with industrial developments. The investment thesis for the property sector has not changed. It will continue to be driven by healthy demand for property, major infrastructure developments, and an influx of investments. As the market overhang is now over (following the conclusion of the US presidential election), investors should re-focus on the beneficiaries. The upcoming announcements on the Johor-Singapore special economic zone and potential KL-Singapore High Speed Rail should further drive investors’ interest on the sector.

Source: RHB Securities Research - 7 Nov 2024