JPMorgan bullish about the nation’s automobile industry

Staff Writer, with CNA

Sat, May 14, 2011 - Page 11

JPMorgan yesterday said it remains bullish on the local auto industry, expecting the sector to continue to enjoy upward momentum.

In a research note, the brokerage said the local auto industry was writing “a four-five year secular growth story” and predicted the sector would have a compound average growth rate of 12 percent between 2008 and 2013, compared with 10 percent growth recorded between 2001 and 2005.

Car sales in Taiwan have risen 42 percent this year from a year earlier after growing at a 28 percent clip in 2009 and an 11 percent rate last year, JPMorgan said.

A 49 percent jump in sales of imported cars, compared with 41 percent sales growth for locally assembled models, showed evidence of strong spending on luxury goods, the brokerage said.

Though JPMorgan expected the lingering effect of Japan’s natural disasters in March to affect the automotive supply chain in the short term, it said the local auto sector’s long-term growth prospects remained intact.

Production at Toyota’s facilities in Taiwan is expected to return to its pre-earthquake level next month, and China Motor Corp (中華汽車), one of the nation’s leading auto makers, said it has sufficient part inventories to meet production needs.

JPMorgan maintained its “overweight” rating for China Motor and Yulon Motor Co (裕隆汽車) and raised its target price for China Motor shares to NT$38 from NT$36 and for Yulon Motor shares to NT$75 from NT$72.

Yulon Motor closed up 1.91 percent at NT$69.30 yesterday, while China Motor ended down 1.04 percent at NT$28.50.