Analysts upbeat on auto sector, see evidence of a bottom
Shares of major automakers were among the biggest winners in the Asian markets Friday after analysts predicted a recovery in global auto demand.
The "sales rate has worsened, but recovery in the next three to six months is now more likely," Noriaki Hirakata, an analyst at Morgan Stanley, wrote in a note to clients Friday.
"Used car sales in the past two months have contrasted nicely with new car sales, up by at least 10% from October-December," he said after a recent visit to North American dealership.
"Dealers and automakers say financially sound customers buying new cars previously are now looking at discounted used cars," he said.
Hirakata's comments came just two days after major Japanese automakers reported a sharp drop in domestic sales and exports for the month of February, along with similar declines in global production.
Toyota Motor Corp. reported Wednesday in Asia that Japanese sales in February, including its subsidiaries Daihatsu Motor Co. Ltd. and Hino Motors Ltd., fell 25.2% and exports sank 68.4%. But by the midday break in Tokyo trading Friday, shares of Toyota were up 3.4%, Honda Motor Co. had tacked on 3.8%, and Nissan Motor Co. had tacked on 3.8%, and Nissan Motor Co. stock was up 3.5%, and Kia Motors. Corp. shares rose 4.3%.
"The auto sector is now ready for an impressive bounce and ... now is the right time to begin to rebuild positions," analysts at Societe Generale wrote in a research note released Thursday.
"Signs of recovery are starting to appear," they said. "Valuations are at historic lows" and the "risk/reward potential at current levels is very attractive by historic standards."
Volkswagen AG was their top pick in the auto sector. It's trading at historical lows and "should be one of the main beneficiaries of the current crisis," said the analysts, who currently have an overweight rating on the auto sector.
"When consumer confidence picks up, we would expect the auto stocks to follow suit," they said. "We believe it is best to be positioned ahead of the event as these rebounds can be very sudden and the upside steep."
The gains among the major automaker shares Friday were in tune with the overall rally in Asia markets Friday. Japan's Nikkei 225 Average was up 1% to 8,719.55, South Korea's Kospi added 0.8%, and Australia's S&P/ASX 200 was up 1.4%.
In early trading, Hong Kong's Hang Seng Index added 0.6%, China's Shanghai Composite climbed 0.7% and Singapore's Straits Times Index gained 0.9%.
