UOB Kay Hian Malaysia Research

UOB Kay Hian Malaysia Research sees a brighter outlook for the cement and steel products in the second half of 2019, underpinned by higher average selling prices (ASPs) folowing the consolidation in the industry and more construction activities. Upgrade the sector to MARKET WEIGHT as ASP improvements will be supported by a gradual improvement in demand. 
 

Particularly, near term catalysts for the sector will emerge from the East Coast Rail Link (ECRL) project which is set to be relaunched by end-August 2019

Meanwhile, China steel prices remain elevated as a result of the production curb in Tangshan city, causing iron ore as well as ferrosilicon and manganese alloy prices to surge.

“We believe that commencement of mega and infrastructure projects will gradually stimulate demand for steel and cement starting 2H19. Apart from that, industry consolidation in the cement industry and potential easing in steel oversupply in 2H19 will help support a recovery in cement and steel ASPs,”

Meanwhile in China, hot rolled coil and steel bar prices remained firm at Rmb3,898/tonne and Rmb4,251/tonne respectively as at  July 18. This was largely owed to the all-time high in crude steel production which was reported at 89 million tonnes (+10% on-year) in May 2019, according to the National Bureau of Statistics. In addition, Tangshan city also recently announced stricter production curbs till end-July which could lend support to China steel prices in the near term.
 

Maybank Kim Eng Group 

Malaysia's economy to be driven by ongoing mega projects in 2H 2019

Malaysia’s economic growth for the second half of this year is set to be healthy and driven by the ongoing mega projects, despite the current global economic uncertainties.

the mega projects are the East Coast Rail Link (ECRL) which has been revived and the Klang Valley MRT 2 as well the LRT 3 project that would become the factors underpinning growth over the long term.

“There are of course downside risks going into the second half and I think Malaysia will not be spared the China-US trade tensions. Export is still negative and consumer sentiment has been coming down a bit as well as the business sentiment.

we’re quite cautious over the second half, because there is so much downside risks.But, having said that, Malaysia in the longer term, will benefit from all the investments and trade diversion coming from China-US trade conflict,” she told reporters on the sidelines of the Maybank Investment Bank Market Outlook, Second Half 2019

interest shown by international firms in relocating their operations to Malaysia would result in positive export numbers for the country going forward, contributed by manufactured products.

Malaysia’s second quarter gross domestic product (GDP) was a surprise on the upside at 4.9 per cent, higher than consensus estimates at 4.7 per cent and I think this is positive news for the country

Malaysia saw its foreign direct investment (FDI) approval surging strongly at around 100 per cent in 2018 as well as in the first quarter of 2019, with more firms interested in relocating to Malaysia.

commenting on the possibility of an expected technical recession in 2020, due to the economic uncertainties and the effect of the China-US trade war, she said the situation would not be as bad as it was in 2008 because it does not involve a global financial crisis.

“(The situation) would really depend on how things play out between China and the US over the next few months.We don’t expect to see a recession yet in 2019, but in 2020, it does look possible if the two countries continued to spar on trade as well the technology side.

Companies in the Property, Steel, Plantation and Technology sectors are among those that may see further M&A activity, as these sectors are in the midst of a down cycle.

“Valuations have come to an optimum level where corporates are actively looking to consolidate and acquire new assets and capacity. In this regard, the current down cycle in some sectors has revealed long term investment opportunities that can weather the current short term volatility