Optimism on auto sector running high

By EUGENE MAHALINGAM
eugenicz@thestar.com.my

Analysts follow MAA in revising upwards car sales figures for 2010

PETALING JAYA: Analysts are upbeat about the outlook of the local automotive industry for 2010, saying “the current state of the auto industry is one of optimism not seen since 2005.”

“We believe the TIV (total industry volume) will exceed our initial forecast of 546,000 units as consumer and business confidence improves,” said Kenanga Research in a report yesterday.

The research house said it was revising upwards its 2010 TIV forecast to 568,000 units from 546,000 units originally due to the commendable sales performance in the first six months of the year.

The Malaysian Automotive Association (MAA) has revised upwards its 2010 TIV forecast to 570,000 units from 550,000 units initially due to the stellar sales performance in the first half of the year.

File photo shows a woman walking past Proton car models on display at a showroom in Shah Alam. — AP

The TIV in the first half grew 19.8% to 301,077 units compared with 251,305 units in the previous corresponding period.

However, Kenanga said that it anticipated TIV in the second half of 2010 to “normalise” as the period was expected to be “seasonally slow.”

RHB Research, in its report, said it was maintaining its 2010 TIV growth forecast of 9.5% to 587,698 units.

“We are keeping our 2010 to 2012 TIV projections. We expect TIV to grow 9.5%, 4% and 3.2% in 2010 - 2012, following a 2% contraction in 2009,” it said.

TIV for 2009 was 536,905 units.

RHB Research said it was positive on the earnings outlook for local automotive companies, namely Proton Holdings Bhd, Tan Chong Motor Holdings Bhd, UMW Holdings Bhd and MBM Resources Bhd.

It noted that UMW was looking to increase localisation of its Toyota models, in particular the Camry by 2012 as part of the company’s RM170mil assembly plant upgrading programme.

“The Camry is currently assembled in Thailand and selling for between RM144,000 and RM174,000 as a CBU (completely built-up) unit. Once locally assembled, we believe this price would be brought down by at least 5% as import duty will no longer be imposed,” it said.

The research house also said UMW was looking at increasing the local content of its Toyota Vios, which had 40% local content.

RHB Research also said it was optimistic about the launch of Proton’sWaja replacement model in the final quarter of 2010.

The vehicle is expected to be similar to the Mitsubishi Lancer and priced RM20,000 to RM40,000 cheaper than the actual Lancer.

It also said Proton could be consolidating its plants in Shah Alam and Tanjung Malim and secure contract manufacturing to optimise plant utilisation which would further improve profitability via better cost control and economies of scale.

Sales of Toyota vehicles rose to 34,943 units in the first half of 2010 versus 30,147 units previously, making it the market leader in the non-national passenger car segment.

Sales of Proton vehicles increased to 80,051 units from 67,770 units during the same period.

RHB Research said it was also positive on the outlook for Tan Chong (which distributes Nissan vehicles) and MBM Resources (which has a 20% stake in Perodua).

Perodua sold 94,936 vehicles in the first half of 2010 compared with 77,045 units previously, making it the market leader in the local passenger market.

Sales of Nissan vehicles increased to 13,406 units from 11,220 previously.

An analyst from a local bank-backed brokerage said the TIV performance in the first half of 2010 was within expectations, adding that he had revised upward his forecast to 573,000 from 561,000 initially due to the good industry performance.

He said he was positive on the outlook of the local auto industry, noting that many car companies were offering low interest rates to boost sales.

http://biz.thestar.com.my/news/story.asp?file=/2010/7/22/business/6709333&sec=business

Government think tank proposes fuel hikes – 15 sen this year and RON95 to cost RM2.60 by 2015

MAY 27, 2010 AT 4:47 PM BY PAUL TAN FILED UNDER MALAYSIAN FUEL PRICES

PEMANDU, a government think tank led by Minister in Prime Minister’s Department Idris Jala tasked with formulating proposals to reduce the country’s government subsidy budget has recommended a petrol price hike of 15 sen for RON95 and 10 sen for diesel.

This is the petrol price hike schedule which we’ll be looking at, based on a crude oil forecast of US$73.06 per barrel in 2011 and the region of between US$79.41 to US$94.52 per barrel between 2013 and 2015.

• Current 2010 Price – RM1.80 per liter RON95
• Q3/Q4 2010 Price Hike – RM1.95 per liter RON95
• 2011 Price Hike – RM2.16 per liter RON95 (broken into 2 hikes, once per 6 months)
• 2012 Price Hike – RM2.20 per liter RON95
• 2013 Price Hike – RM2.34 per liter RON95
• 2014 Price Hike – RM2.52 per liter RON95
• 2015 Price Hike – RM2.60 per liter RON95

These are just the proposed hikes for RON95. RON97 was not mentioned in the recommendations, which indicates that the government is further decreasing priority on RON97 subsidies. We could see a price of way over RM3 per liter for RON97 by 2015.

Not only that, the proposal recommends that the government renegotiate the PLUS toll concession contract this year and the LDP contract by 2013, then all toll concession agreements must proceed without any subsidies, resulting in a toll hike of between 10% to 67% depending on the highway, distance, etc from this year onwards.

For those dreaming of a future of driving electric cars, electricity tariffs are to be untouched for those using less than 200 kWh for this year. However gas prices are proposed to be increased by RM3/MMBTU every 6 months, which will translate to an electricity increased of 1.6 sen/kWh every 6 months. If we take the Nissan Leaf’s 24kWh battery as an example, that’s a RM0.38 hike per full charge for the Nissan Leaf every 6 months. LPG, which is priced at RM24.50 has been proposed to be hiked to RM27 with a 20% price increase every year.

The proposal also spells out a “mitigation plan” which involves giving cash rebates of 126 ringgit for owners of cars with engines smaller than 1,000cc in capacity, and 54 ringgit for owners of small motorcycles. My reference source doesn’t mention of this is one time, monthly, or yearly. There is also a proposal for a 20% discount on toll charges for frequent users and a cash rebate of RM20 for anyone with a Malaysian IC – not sure what this cash rebate is for but I’m assuming it’s for fuel?

According to PEMANDU this will save the government about 3 billion ringgit this year, 14 billion ringgit next year, 21 billion ringgit in 2012, 29.5 billion ringgit in 2013 and 35 billion ringgit in 2014. These plans are yet to be approved by the government.

http://paultan.org/2010/05/27/government-think-tank-proposes-fuel-hikes-15-sen-this-year-and-ron95-to-cost-rm2-60-by-2015/

First round of cuts

PETALING JAYA: The Government has begun its first round of a gradual subsidy rationalisation programme, promising it would have minimal impact on families.

Describing the cuts as part of a “difficult but bold” decision to reduce fiscal deficit, the Government said it would still have to spend an estimated RM7.8bil on fuel and sugar subsidies this year.

Thus, effective today, prices of petrol, diesel, liquefied petroleum gas (LPG) and sugar have increased following a reduction of the subsidy.

Sugar is revised to an additional 25 sen per kg to RM1.90. LPG is up 10 sen per kg to RM1.85.

Petrol RON 95, RON 97 and diesel have gone up by five sen per liter. For RON 97, the Government has decided to withdraw the subsidy later and subject it to a managed float, where the price will be determined by an automatic pricing mechanism.

“This subsidy rationalisation will, according to estimates, allow Malaysia to reduce Government expenditure by more than RM750mil this year,” a statement from the Prime Minister’s Office said yesterday.

Details of the changes are available on the websites of the Prime Minister’s Office and Pemandu.

The Government also said the “long-needed” economic reforms would help Malaysia maintain the strong growth it had achieved to become a developed and high-income nation.

“We have begun a planned and fair reform of a subsidy regime that for too long has been ineffective in helping those who need it most and, over time, has become a barrier to Malaysia’s progress,” the statement read.

The prices of fuel and sugar in Malaysia would still be among the lowest in the region, it said.

It also said the Government made the decision about the subsidies following robust consultations with the people, citing the thousands of Malaysians who took part in policy labs and Open Day.

“As with subsidy reform, the Budget, the Government Transformation Programme and the National Key Economic Areas, the Government has made a determined effort to engage the public, listen and learn, and then act in the best interest of the nation,” it said.

Although Malaysia had weathered the global recession well, the Government said the country could not achieve its ambition to be a high-income nation by simply managing through a crisis.

“As the Government has consistently said over recent months, we must also implement subsidy reforms that will remove distortions in the marketplace and enable us to better target our resources on those most in need, and on investments that will provide lasting benefits for Malaysians.”

It assured that the savings from the reforms would allow for resources to be better channelled for families, communities and business growth.

“Measures such as the 1Malaysia clinics, the 1Malaysia mobile clinics, as well as the scholarships for all 9A+ and deserving students – specifically those who have done well, but come from lower income families – are made possible by such reforms,” it said.

There were three main concerns which led to the subsidy rationalisation: wrong beneficiaries, wastage and abuse.

The Government also said that businesses used twice as much subsidised sugar than households, while owners of luxury cars enjoyed cheap fuel although they could afford unsubsidised prices.

http://thestar.com.my/news/story.asp?file=/2010/7/16/nation/6678655&sec=nation

Malaysian Rates to Rise as Reserves Lag Behind Neighbors': Chart of Day

By Shamim Adam and Michael Munoz - Jul 13, 2010

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Malaysia’s central bank will probably raise interest rates once more this year to attract capital and boost foreign reserves to shield the ringgit from a potential global slowdown, Morgan Stanley said.

The CHART OF THE DAY shows the nation’s reserves have stayed below the 2008 peak while those of neighboring Thailand and Indonesia climbed above levels before the global crisis. The lower panel shows Bank Negara Malaysia was the first central bank in Southeast Asia to increase borrowing costs this year, and it surprised half the economists surveyed by Bloomberg when the overnight policy rate was raised to 2.75 percent on July 8.

“Concerns regarding pressures on capital accounts and, consequently, currency and foreign-reserve levels, may still be lingering,” Morgan Stanley economists led by Deyi Tan said in a report the day after the central bank’s decision. “A policy rate rise would help to arrest the weakness on the capital account with the interest-rate differential effect. The window of opportunity closes when other central banks begin to normalize policy rates.”

Bank Negara has increased its benchmark rate by a combined 0.75 percentage point its past three meetings, helping the ringgit become Asia’s best performer against the dollar this year. In Thailand and Indonesia, where foreign reserves have risen above 2008 levels, policy makers have kept borrowing costs unchanged this year. The three nations were at the fore of the Asian financial crisis in the late 1990s, set off by Thailand’s devaluation of the baht.

The accumulation of reserves is one tool Asian nations can use to combat excessive capital movements, International Monetary Fund Managing Director Dominique Strauss-Kahn said this week. Malaysia’s holdings were recently about $94.8 billion, or 25 percent, below a June 2008 peak, compared with Thailand’s, which have climbed 40 percent to $147.8 billion in the same period, data compiled by Bloomberg show. Indonesia’s reserves have increased 28 percent to $76.3 billion in the past two years.

“In the event that a second global recession materializes, the support to foreign reserves from rate hikes now would help preserve the ammunition needed to protect the currency later on,” the Morgan Stanley economists said.

(To save a copy of the chart, click here.)

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

Taken from: http://www.bloomberg.com/news/2010-07-13/malaysian-rates-to-rise-as-reserves-lag-behind-neighbors-chart-of-day.html