Steel counters such as Annjoo, Ssteel, Masteel & Lionind are now taking a breather. Is now a good time to buy, add position or to sell steel stocks?
The correction is taking place for various obvious reasons. The gas price hike which takes effect on 1st January, 2018 will somehow impact on their bottom lines.
The Malaysian Iron and Steel Industry Federation (MISIF) has on 4th December, 2017 informed the press that the natural gas consumed is the second highest production cost component for the industry. The gas price hike is expected to result in an additional cost of about RM200 million per year for the industry.
Can this cost be passed on to customers? Construction companies and developers are their main customers.
The properties are in serious oversupply situations. The shopping malls, condominiums and shop offices are over-built everywhere in big cities. We are now in a stage where properties were completed but there are no takers. The last time the same took place was in Port Dickson in 1997.
The reality of today is that there are presently RM40-45bil worth of properties completed looking for takers. Developers may need a few years to clear their stocks. Developers have deferred launches of new development and many opt to go into hibernation.
Can the construction sectors sustain the demand for steel products? The future earnings of steel stocks remain to be seen. When there are arising uncertainties, these steel stocks are not likely to continue to climb.
Can readers tell which theme play will dominate 2018?
http://klse.i3investor.com/blogs/investsensibly/144966.jsp
