Multi-billion investments in tech sector to spur industrial development
06 Jul 2024
Global technology giants have been actively announcing their investments in the Southeast Asian region, including in Malaysia, and this bodes well for infrastructure developers as well as for other sectors which could benefit from the spillovers from these tech developments.
In a report, the research team at RHB Investment Bank Bhd (RHB Investment) pointed out that Malaysia has benefited substantially from tech giants investing in Southeast Asia, largely due to its strategic location (being next to Singapore), as well as favourable infrastructure development.
Over the past three months, it noted that many developers have respectively announced their land disposals directly or indirectly to data centre (DC) players, as well as investments related to the DC business.
“We think the DC investment cycle is only at the initial stage, and we foresee much more industrial land transactions going forward.
“While some developers, especially those with solid balance sheet, may start to look at the viability of this DCrelated real estate investments, developers such as Sime Darby Property and Mah Sing may further expand their investments going forward,” it said.
It also pointed out that although new job creation is likely to be minimal, it believed that the entrance of these renowned technology companies into Iskandar Malaysia, Elmina Business Park, Southville City, and Cyberjaya will likely spur the re-rating of land prices in the surrounding areas, and more importanly, attract other technology or IT supporting industries into these industrial parks in the future.
“Interestingly, we learnt that residential property prices at City of Elmina are holding up well,” it added.
Of note, according to Prime Minister Datuk Seri Anwar
Ibrahim, Malaysia has approved RM114.7 billion worth of investments in DCs and cloud services between 2021 to 2023.
Malaysia also aims to attract RM500 billion investments in the semiconductor segment.
Meanwhile, the research team noted that recently, SD Guthrie (previously known as Sime Darby Plantation) also announced plans to work with Permodalan Nasional Bhd (PNB) to participate in the proposed Kerian Integrated Green Industrial Park (KIGIP), which is an initiative driven by the Federal Government in collaboration with the Perak State Government.
The development involves 404 ha of land in Kerian, including 267 ha of solar farms. While the project is intended to attract semiconductors and E&E investments, SD Guthrie is also exploring opportunities to develop DCs.
The government has agreed in principle to approve an allocation for a raw water distribution project from Sungai Perak to the Bukit Merah Dam to provide treated water supply to northern Perak and Penang, which is estimated to cost MYR4bn. Prime Minister Datuk Seri Anwar has also mentioned that it should only allow DCs that specialise in Artificial Intelligence.
“In our view, we welcome the upcoming infrastructure developments (utilities and water supply) that will take place in Kerian, as it should spur not only industrial, but also other residential and commercial developments over the longer term.
“However, the plan to develop DCs in KIGIP may take time, as infrastructure building for utiltiies supply typically takes at least one to two years to complete,” RHB Investment said.
Going into the second half of 2024 (2H24), the research team believe positive news flow on the potential incentives and initiatives on the JohorSingapore Special Economic
Zone (JS-SEZ), infrastructure development, as well as foreign and domestic direct investments will continue to buoy investor sentiment on the property sector.
“The incentives for the Special Financial Zone in Forest City are expected to be finalised in August, while the detailed announcement on the JS-SEZ is likely to take place in September/ October, possibly when Budget 2025 is tabled.
“The revival of the KLSingapore High Speed Rail is a wild card, which could spur further re-rating of many property stocks,” it said.
It is also upbeat on the recent official announcement on the new Malaysia My 2nd Home (MM2H) regulations.
“The new programme aims to attract high net worth individuals. The requirement for MM2H participants to own a property also means that the government targets to attract more serious long-term residents and investors.
“We think developers with exposure in the KL city centre, Mont’ Kiara, Penang and Iskandar Malaysia will likely benefit more.
“Iskandar Malaysia should see MM2H participants from Singapore given the ease of travelling with the upcoming completion of the Johor Bahru– Singapore Rapid Transit System (RTS) and cheaper living costs,” it explained.
All in, RHB Investment maintained its ‘overweight’ rating on Malaysia’s property sector as it believed that the current property market upcycle is much healthier as interest rates have reached a normalised level, and the market is adapting to the new norm for inflation.
“More importantly, the influx of foreign direct investments this round is primarily in the technology and semiconductor industries, which should help to drive the country’s GDP growth over the medium term,” it highlighted.
Source: Borneo Post
