MIDF upgrades auto sector to 'neutral'

MIDF Research expects the government to unveil the revised National Automotive Policy (NAP) in July.

In
its Equity Beat publication today, the research house said the new NAP
might focus on further liberalisation of the automotive sector to
attract high-tech automotive component makers to invest in Malaysia in
order to catch up with
Thailand's motor industry in terms of growth and export volume.

"One of the key areas being looked into by the government is the opening up of the lucrative 1.8 litre segment.

"We
also gather that the government, together with consultants and industry
players are currently reviewing their efforts to boost investment in
manufacturing hybrids and electric vehicles," it said.

Meanwhile,
MIDF Research said vehicle sales were expected to pick up starting
second quarter 2012 as the automotive supply chain normalises and the
market becomes accustomed to a tighter lending regime introduced by
Bank Negara Malaysia in January.

"We now believe that our 2012
total industry volume forecast of one per cent year-on-year or 611,140
units in 2012 is within reach.

"We expect the higher sales from
the second quarter to neutralise the relatively weak first quarter
numbers. However, we remain cautious of the downside risks to our
numbers," it said.

The research house upgraded its sector call
to 'neutral' and said: "We will only be upgrading to 'positive' if
there are concrete evidence that demand momentum can be sustained."

It
top picks "buys" are UMW and MBM Resources at target prices of RM8.80
and RM3.40 respectively, while Tan Chong remains a "neutral" at RM4.30.
-- Bernama