KENANGA Research has maintained its neutral call on the automotive sector in 2020 but reduced the sales target to 560,000 units from 612,000 units previously on cautious consumer spending in the first half of this year due to high-value discretionary spending.
In a research note today, it said the quantum of the decline in the total industry volume (TIV) will not be as severe as the 1997-98 Asian financial crisis, but below the 2007-08 subprime crisis based on the current state of the Malaysian economy.
“As all the companies under our coverage are already experiencing sharp falls in their share prices, we believe that the downside is limited; thus, we maintain our calls but revising target prices to reflect the lowest valuation possible for most of the stocks and expect a better second half on recovering consumer sentiment and stream of all-new model launches,” it said.
The research firm said a nationwide movement control order (MCO) to contain the outbreak will adversely impact the economy in the short term, but would be limited given that there is an exception for important government and business services to run as usual.
“This has led to showrooms, vehicle production and deliveries to be temporarily closed, halted and delayed, respectively, across all marques.
“Going forward, the full impact would depend on the outcome of containment measures and whether movement restriction would be extended,” it said. — April 2, 2020, Bernama
