KUALA LUMPUR: There will be a short-term impact, though not a severe one, on the local automotive sector resulting from the protracted flooding in Thailand.
“We do not foresee this will heavily impact the industry over the midterm given the availability of alternative suppliers in the country’s non-affected areas,” OSK Research said in a report last week.
The research house said the areas in Thailand affected by the floods accounted for 10% of the country’s total production and the supply of critical components to the auto sector remained sturdy. It expects production to normalise in two months.
According to OSK Research, the flooded provinces house nearly 40 auto parts suppliers and car manufacturers affected are Honda Motor Corp, Mitsubishi and Toyota.
OSK Research remains bearish on the domestic automotive sector due to an expected change in overall consumer sentiment.
“Consumers are starting to become more cautious on big-ticket item purchases and if this persists, new model launches will unlikely spur growth for automakers,” it said.
OSK Research downgraded the auto sector to “underweight” from “neutral”, with a “sell” rating for UMW Holdings Bhd, Tan Chong Motor Holdings Bhd and Proton Holdings Bhd.
CIMB Research said although there was no interruption to the supply of vehicles to Malaysia, it cautioned investors to monitor the situation.
“There is no guarantee that deliveries will not be affected if the floods worsen. The Malaysian auto sector has had a very bumpy ride this year, which was hit by supply chain snags and the stronger US dollar. We advise investors to stay on the sidelines until there is clarity on the Thai situation,” said CIMB, adding that there is a risk to sales and earnings projections if the floods worsen, leading to an output jam.
This article appeared in The Edge Financial Daily, October 24, 2011.
“We do not foresee this will heavily impact the industry over the midterm given the availability of alternative suppliers in the country’s non-affected areas,” OSK Research said in a report last week.
The research house said the areas in Thailand affected by the floods accounted for 10% of the country’s total production and the supply of critical components to the auto sector remained sturdy. It expects production to normalise in two months.
According to OSK Research, the flooded provinces house nearly 40 auto parts suppliers and car manufacturers affected are Honda Motor Corp, Mitsubishi and Toyota.
OSK Research remains bearish on the domestic automotive sector due to an expected change in overall consumer sentiment.
“Consumers are starting to become more cautious on big-ticket item purchases and if this persists, new model launches will unlikely spur growth for automakers,” it said.
OSK Research downgraded the auto sector to “underweight” from “neutral”, with a “sell” rating for UMW Holdings Bhd, Tan Chong Motor Holdings Bhd and Proton Holdings Bhd.
CIMB Research said although there was no interruption to the supply of vehicles to Malaysia, it cautioned investors to monitor the situation.
“There is no guarantee that deliveries will not be affected if the floods worsen. The Malaysian auto sector has had a very bumpy ride this year, which was hit by supply chain snags and the stronger US dollar. We advise investors to stay on the sidelines until there is clarity on the Thai situation,” said CIMB, adding that there is a risk to sales and earnings projections if the floods worsen, leading to an output jam.
This article appeared in The Edge Financial Daily, October 24, 2011.
