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- CIMB Securities said in its note that the domestic focus on the sector makes it relatively attractive to foreign investors.
KUALA LUMPUR (April 7): The construction sector is likely to be less impacted by the US tariffs due to its focus on the domestic market, but industrial job flows may slow temporarily as companies adjust their strategies, analysts said.
CIMB Securities said in its note that the domestic focus on the sector makes it relatively attractive to foreign investors.
This is especially if foreign portfolio inflows return more strongly once there is greater clarity on the impact of the new tariffs.
Steel and cement prices, which are already subject to a 25% US import tariff, are also expected to remain muted in the short term due to potential trade diversion and weaker demand, the research house said in a note on Monday.
For construction giant Gamuda Bhd (KL:GAMUDA), whose overseas projects account for nearly two-thirds of its revenue and over half its profit in the first half of FY2025, its key overseas markets — Australia and Singapore — face only a baseline 10% tariff, CIMB Securities noted.
However, the knock-on effect of the high 46% US reciprocal tariffs on Vietnam’s economy may impact Gamuda’s property sales in the country, which are expected to account for half of its RM6 billion sales target for FY2025.
As a result, CIMB Securities has revised Gamuda's property sales target to RM5.2 billion, about 13% lower than the company’s original target.
Despite this, CIMB Securities continues to like Gamuda due to its strong earnings base, RM35 billion in high-confidence bids that could boost its RM40 billion–RM45 billion order book target by end-2025, and its healthy net gearing of 39%.
It flagged delays in major infrastructure project rollouts and rising costs of imported construction equipment as risks to the sector.
Meanwhile, Hong Leong Investment Bank (HLIB) noted that the reciprocal tariff could temporarily slow industrial job flows as companies reassess their strategies.
HLIB highlighted that trade-related projects, such as warehouses, factories, and industrial parks, accounted for 9% to 10% of annual contract awards in 2023–2024. Despite smaller tariff differences, the segment could still recover under normal economic conditions.
HLIB, which maintains an 'overweight' call for the sector, expects another strong year of contract flows, supported by infrastructure and data centre (DC) projects that could drive further order book growth.
It said first quarter 2025 (1Q2025) domestic contract awards got off to a strong start at RM16.4 billion.
HLIB said this is the highest quarterly tally since 1Q2016 and is the second highest since 2009, bettering a strong DC-driven quarter in 2Q2024 (RM13.8 billion).
Although the sector remains largely domestic-focused and less exposed to direct external shocks, HLIB is cautious about second-order risks — particularly from a potential global economic slowdown triggered by new tariffs.
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