Carmakers surge on stimulus talk

Business | Bloomberg and Gary Poon 18 Apr 2019

Carmakers in mainland China surged on speculation authorities are considering relaxing controls over the number of automobile licenses in major cities.

A document circulating on Chinese social media showed China's economic planner was drafting a series of stimulus measures to bolster consumption, said Danny Chen, an analyst at CIMB Securities. People familiar with the matter confirmed the proposals have been drafted and include potential subsidies for new-energy vehicles.

Shares of electric-vehicle maker BYD (1211) soared as much as 14 percent, leading gains on the MSCI China Index, where Chinese automaker stocks accounted for six of the top 10 gainers.

Great Wall Motor (2333) rose as much as 9.7 percent and was on track for its highest close since June 2018. Geely Automobile (0175) rose as much as 12 percent as Daimler increased its stake in the company. The world's biggest auto market is suffering from its worst slump in a generation.

China car sales plunged for a tenth consecutive month in March, dragged down by slowing growth and trade tensions with the United States. The slump has intensified competition, forcing manufacturers and dealers to offer discounts that squeeze their margins.

Meanwhile, KPMG believed about half of the car dealers will disappear after a recent scandal that dealers forced buyers to borrow money.

Philip Ng, the partner in KPMG China advisory services, said that market investors are very cautious on large-sized investment projects, and manufacturers may short of funding.

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