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Building industry skyrocketing

Construction and engineering sectors are hitting an ultimate high due to preparation for the 2010 Fifa World Cup and the building of the Gautrain high-speed rail link. 

An analyst at Old Mutual Investment Group, Feroz Basa, agrees that spending was likely to continue for a while as demand outstripped supply in these industries.  Other sectors such as retail, telecommunications, media and transport will also benefit indirectly. 

R400 billion will be spent by government on infrastructure over the next few years of which R9 billion has been allocated for World Cup preparations. 

Murray & Roberts, a construction and engineering group, recently said that its order book had increased by 54%.  Some people still feel that valuations of shares of construction companies are too high and that nobody knows how long the industry will continue to blossom.  Increasing competition, including entry of foreign companies, might impact negatively on the present multibillion-rand wave that construction and infrastructure companies are riding. 

AltX is the JSE’s platform for small and medium-sized firms and information from the JSE shows that 50% of companies listed on AltX last year, were construction and infrastructure companies. 

The chief investment officer at Argon Asset Management, Mduduzi Ndlovu, said the listings reflected the high level of interest in fixed capital formation.  Investors are keen to put their money in these industries, as the market conditions are looking very favourable indeed. 

Original Article:  Business Report, 21 March 2007