midf research backs construction sector on strong job flows and mega projects

PETALING JAYA, 20 SEPTEMBER 2026 —

MIDF Research lifted its outlook on Malaysia’s construction sector on Thursday, citing a softening in steel‑bar prices and stable cement rates that should ease cost pressures for contractors.

“Despite concerns surrounding data‑centre investments following the artificial‑intelligence chip restriction, the Stargate initiative and the DeepSeek developments, we believe the market reaction may have been overdone,” the research note said. It added that Malaysia’s strategic location, abundant resources and cost advantages keep the country a key data‑centre hub, and industry feedback suggests no major disruption to upcoming projects.

The note highlighted several government‑linked projects that could sustain demand. The RTS Link in Johor, the Penang LRT extension and other large‑scale works are expected to drive private‑sector spending on construction and related services. MIDF Research expects these projects to translate into higher order books for major contractors.

Among the firms it singled out, MIDF named Gamuda Bhd, IJM Corp Bhd and Sunway Construction Group Bhd (SunCon) as its top picks in the construction space. In the cement arena, the brokerage recommended Malayan Cement Bhd as a primary beneficiary of the sector’s expansion.

The research house linked recent volatility in construction stocks, especially Gamuda and SunCon, to worries over the U.S. AI chip restriction. The Biden administration policy caps United States data‑centre operators at 7 % of processing power in Tier‑2 countries such as Malaysia and limits GPU usage to 50,000 units per facility. MIDF noted that the rule sparked fears of slowed large‑scale data‑centre investments in the country.

Those concerns were amplified by the so‑called Stargate initiative, a US$500 billion plan backed by Microsoft and Meta to expand data‑centres in the United States. The brokerage warned that the initiative could shake market confidence in Malaysia’s role as a global data‑centre hub, but it concluded that the impact is likely overstated.

“Malaysia remains a prime location for data centres due to its abundant power and water resources, cost advantages, and established infrastructure,” the note said. It argued that the country’s existing data‑centre ecosystem, coupled with continued private‑sector investment, should mitigate any short‑term headwinds from U.S. policy changes.

The report did not provide a specific price target for construction stocks, but it emphasized that the easing of steel‑bar costs—where prices have softened modestly over the past quarter—combined with steady cement pricing creates a supportive margin environment for contractors. This, MIDF argued, should help companies improve profitability even as input costs stabilize.

Investors will be watching upcoming earnings releases for the three top‑pick contractors. IJM Corp, for example, is slated to report its second‑quarter results next week, and analysts will look for signs that order inflows from the RTS Link and Penang LRT are materialising. Similarly, SunCon’s balance sheet will be scrutinised for any impact from the AI‑chip restriction on its data‑centre related projects.

Overall, MIDF Research expects the construction sector to outperform the broader market in the coming months, provided that the pipeline of infrastructure projects remains intact and cost pressures continue to ease. The brokerage’s positive stance suggests a shift in sentiment after a period of volatility driven by external policy concerns, reinforcing confidence among fund managers and corporate investors in the sector’s growth trajectory.

Related: Gamuda Bhd · Petaling Jaya