KUALA LUMPUR • Shares of Malaysian contractors plunged yesterday as the government intensified its efforts to rein in spending by reducing the cost of an almost US$14 billion (S$19.4 billion) mass rapid transit (MRT) project.
Shares of Gamuda slid by a record and MMC Corp fell to the lowest in nine years, after the Finance Ministry rejected an offer from the MMC-Gamuda consortium to build an underground portion of the MRT2 project. The government also shaved RM5.22 billion (S$1.7 billion) from the above-ground portion that will be constructed by the same group, the ministry said in an e-mailed statement on Sunday.
The South-east Asian nation has been grappling with debt and liabilities exceeding RM1 trillion and state revenue curbed by the removal of a sweeping consumption tax that was replaced with a more selective levy.
Since Prime Minister Mahathir Mohamad swept to power in May, he has reviewed billion-dollar transportation projects, and cancelled or deferred many of them due to budget constraints.
The MRT2 announcement "reinforces the government's priority with cost-down of major infrastructure projects", analyst Adrian Wong of Maybank Investment Bank wrote in a research note yesterday.
Construction Index Malaysia's infrastructure developers and contractors slumped across the board after the news, with the Bursa Malaysia Construction Index sliding 7 per cent to the lowest since April 2009. Gamuda fell as much as 28 per cent before closing at RM2.43 a share, while MMC lost up to 16 per cent to RM1.13, and IJM Corp ended 10.6 per cent lower.
Amount that the Malaysian government shaved from the above-ground portion of the MRT2 project that will be constructed by the MMC-Gamuda consortium, according to the Finance Ministry.
MMC-Gamuda in a statement yesterday evening said its termination from the project would affect over 20,000 people involved in the underground works from a supply chain of more than 600 Malaysian companies, Malaysiakini news site reported.