Kenanga Investment Bullish On Construction Sector, Driven By Data Centre Demand
KUALA LUMPUR, July 3 (Bernama) -- Kenanga Investment Bank Bhd remains bullish on the construction sector, given persistent demand for data centres, underpinned by continued capital expenditure from major technology (tech) firms.
The investment bank said that, after a sluggish start to the year driven by concerns over the United States’ (US) artificial intelligence (AI) diffusion policies, sentiment in the construction sector rebounded strongly in the second quarter (2Q) of 2025, buoyed by renewed confidence as global tech giants ramped up data centre investments.
It said that earlier in 1Q 2025, concerns over the US AI diffusion rules had cast a shadow on Malaysia’s data centre development outlook, triggering a heavy sell-off in construction stocks.
“We remain optimistic that the construction sector will continue its upcycle into the second half of 2025, underpinned by a robust pipeline of data centre roll-outs and the impending public infrastructure projects,” it said in a note.
Kenanga Investment said that although the MRT3 timeline remains uncertain, several key projects are progressing, including Penang LRT Mutiara Line Packages 2 and 3, Penang Airport expansion, and Phase 2 of the Pan Borneo Highway, Sabah-Sarawak Link Road, the Subang Airport redevelopment plan, and the Johor LRT/Autonomous Rapid Transit (ART).
It said the high-profile KL-Singapore High-Speed Rail remains a medium-term catalyst, and beyond data centres, industrial developments such as semiconductor foundries will support further private sector growth.
“We maintain our assumption of average annual contract awards at RM180 billion for 2024-2026,” it said.
According to the Construction Industry Development Board, RM75.5 billion in main contractor construction contracts had already been awarded as of the end of May 2025, compared to RM226.5 billion in total awards for 2024.
“Construction players have set ambitious job replenishment targets for 2025, which, if achieved, could offer further upside to our target prices. We maintain our ‘overweight’ call on the sector,” it added.
-- BERNAMA
