China Auto Stocks Unlikely to Have Reached Good Entry Point

Chinese automobile stocks are likely not at a good entry point yet, as the market seems to be underestimating the negative impact of global supply chain disruptions caused by the coronavirus, Jefferies says. While the sector’s longer-term outlook may appear attractive given policy stimulus and the expected recovery after years of market downturn, the bank believes the sector hasn’t reached bottom yet. Not only will overseas production suspensions hurt China’s domestic manufacturing and imports, car makers’ investment income may also take a hit from weakness in the international car market, Jefferies says. Potentially tepid upcoming macroeconomic data may further dampen consumer confidence and demand, Jefferies says.