Steel Sector POSITIVE

Investment summary


The government has liberalized the domestic steel market by removing price and import restrictions. We think this could be a precursor to meaningful government pump-priming, and re-iterate our positive ratings on steel-makers in our universe (AJR, LionInd, MSW, Kinsteel).



We are positive on Malaysia’s steel sector due to: (1) a rebound in domestic demand from the construction sector; (2) Chinese steel export curbs, which create a benign pricing environment for Malaysian producers.



Adding fuel to fire

Newsflow conditions for the construction steel sector have been perfect: margin expansion on out-of-control global steel price inflation, and now domestic mkt liberalization. Sector valuations are still 20-30% below historical peak-cycle averages. Sector remains a good 6-mth trade, at least until a China cyclical slowdown in Q408.