KUALA LUMPUR: Affin Hwang Capital Research expects momentum in the automotive sector to remain strong for the remaining two months of the year, supported by new model launches in the pipeline and year-end promotional campaigns.
The research house said on Monday that it maintained its Underweight stance on the sector with Sell calls on both UMW Holdings and APM.
For sector exposure, it prefers Pecca and MBM Resources.
Total industry volume (TIV) for October 2017 rose 14.7% on-month to 47,000 units driven by a longer working month as well as the ongoing year-end promotional campaigns.
Cumulative auto sales for the first 10 months of the year recorded a 1.4% on-year increase to 472,700 units.
However, the research house noted that total passenger car sales declined by 1.5% on-year.
It maintained its 2017 TIV sales assumption unchanged at 592,000 units, a 2% increase on-year.
The research house said upside risks to its Underweight call and auto stocks were minimal compression in profit margins and unexpectedly strong TIV sales.
Downside risks, it said, could come from a prolonged tightening of auto financing hindering the borrowing ability of car buyers; exchange rate risk and a slowdown in the economy.