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Auto & Transport Roundup: Market Talk

1 Jun 2018 8:20 am

The latest Market Talks covering the Auto and Transport sector. Published exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET.

0810 GMT - President Trump's tariffs on European imports of steel and aluminum of 25% and 10%, respectively, "is a moderate negative hit for FCA [Fiat Chrysler] and less relevant for VW, BMW and Daimler," says JP Morgan Cazenove analyst Jose Asumendi. Overall, the indirect negative impact of rising trade tensions, as well as the possibility of car-import tariffs, is much larger than effects from the now imposed steel and aluminum tariffs, he says. If the U.S. closed the car-import duty gap to Europe, BMW's earnings could see a 5% hit in the worst case, while Volkswagen earnings could lose 4% and Daimler 3%, he estimates. Fiat Chrysler, which sources the majority of vehicles from North America, would see a lower impact, he notes. (Max.Bernhard@dowjones.com; @mxbernhard)

0745 GMT - The IPO of Chinese port operator Tian Yuan ran aground today, with shares down 18% and at session lows ahead of the close. The retail portion of the deal was only 17 times oversubscribed, a tiny amount considering some recent deals have been in the thousands. Shares priced at the low end of expectations. Most of the proceeds from the HK$127.5 million ($16 million) deal will go into covering a terminal expansion. The company has been profitable the past 3 years, logging more than 40% growth in both 2016 and 2017. (kevin.kingsbury@wsj.com; @kevinkingsbury)

0717 GMT - Great Wall Motor spent too much and too soon making pricey high-end SUVs, says Smartkarma's Scott Laprise as the year of the SUV continues in China with new, larger and even 7-seater models coming out. Chinese consumers don't want to spend close to CNY300,000 ($46,900) on a domestic-branded vehicle when that could pay for a locally made German brand, he notes. BYD's new Max SUVs, running under CNY119,000, look amazing, says Laprise. Great Wall shares are down 14% this year. (john.wu@wsj.com)

0649 GMT - With some major producers logging sales gains of more than 25% last month, shares of Indian vehicle makers are leaders today in climbing some 2% and reducing some of their 2018 pullbacks. Two-wheel producer Bajaj is outperforming at 5% to cut 2018's slide to 13%. The gains come as investors expect forecasted good monsoons and overall economic growth to boost auto demand near-term, though higher fuel prices could cap the increases. This after India's total vehicle sales rose 15% last FY. (debiprasad.nayak@wsj.com)

0624 GMT - Minth's 1Q margin miss was mainly due to unexpected costs during a factory-automation upgrade, says Credit Suisse, adding that should be priced in the Chinese autoparts maker's stock. Shares have slumped 31% from their mid-January record high, and today hit 9 1/2-month lows. The bull maintains confidence for a better 2019, though its stock target falls 10% to HK$46. Minth is down 2% at HK$34.55. (john.wu@wsj.com)

0606 GMT - Kenanga joins the bull camp on Malaysian conglomerate DRB-Hicom, predicting gains from its partnership with Chinese automaker Geely to start this year. There's also the stock losing 1/3 of its value the past 3 months and the company posting a smaller-than-expected F4Q loss. DRB's Proton auto unit is in the midst of finalizing a 10-year business plan targeting 30% share of Malaysia's auto market and 10% regionally through new models in alliance with Geely, the broker notes. Its stock target falls 8% to MYR2.30 amid May's 19% slump, the most in 18 months. Shares are up 4% today at MYR1.82, leaving them 0.5% lower for 2018. (saurabh.chaturvedi@wsj.com; @journosaurabh)

0546 GMT - Singapore will likely seek more flying rights for its airlines to Indian cities as traffic between the two continues to log double-digit growth. Indian fliers to Singapore grew 14% in 1Q from a year earlier, making it the fastest-growing market for Changi Airport. But Singapore-based airlines have nearly exhausted all their rights to fly into Indian cities and Indian carriers are fast using up theirs. Singapore may seek unlimited flying rights as part of its push for open skies in the region. Prime ministers of Singapore and India announced today an air-traffic agreement will be reviewed. (gaurav.raghuvanshi@wsj.com)

0357 GMT - The lack of bidders for a majority stake in debt-ridden Air India is an embarrassment for Modi, who has been aggressively pushing for the carrier's privatization ahead of national elections next year. No deal may weaken the PM's image as a reformer. Various conditions kept potential bidders away, including the debt load and being unable to fire employees for at least a year. (rajesh.roy@wsj.com)

0311 GMT - The government's plan to sell a majority of Air India was almost doomed from the start. The country bars foreigners from owning controlling an airline there, but without that no foreign carrier can justify investing in an airline known to suffer from bureaucratic interference and mismanagement. As no bids came in by Thursday's deadline, the government probably ought to install professionals to run Air India and later hold an IPO. That's what Malaysia is attempting with its flag carrier, with some success thus far. (gaurav.raghuvanshi@wsj.com)

0229 GMT - Singapore Airlines will be raising its capacity to the US by 10% through resuming flights to New York, says CAPA - Centre for Aviation. But it will be much higher on the upper end as new flights will have just business and premium-economy seats. SingAir's US capacity for those higher-paying segments to and from Singapore will jump 22% and 58%, respectively, CAPA adds. The carrier began increasing seats to the US in late 2016 after a few years of cuts, and current capacity is 14% below that seen 5 years back. (gaurav.raghuvanshi@wsj.com)

2104 GMT - Firms from industrial giants to car makers are competing with each other and traditional technology outfits for people with expertise in high-tech fields like machine learning, artificial intelligence and cybersecurity. US universities awarded nearly 4,000 doctorates in math and computer sciences in 2016, almost twice as many as in 1996, according to the National Science Foundation. But in narrow subfields such as applied math or statistics, the numbers are meager compared with demand. In 2016, 120 people received Ph.Ds in robotics, a specialty so new that it wasn't tracked until 2010. Employers are handicapped by several factors, recruiters say: Cutting-edge skills are evolving faster than universities can train people, the supply of talented young workers entering these fields isn't satisfying the huge demand for them. Mobility--workers' willingness to uproot their lives for a job in a new place--has also declined. (lauren.weber@wsj.com; @laurenweberWSJ)

1254 GMT - Car makers' valuations have reached extreme levels in the wake of a recent report that U.S. President Donald Trump wants to bar German premium car makers from the U.S. market, says Evercore ISI. Daimler shares trade 0.6% lower, while Volkswagen and Audi lose 1.0% and 1.2% respectively. The recent losses are a buying opportunity, especially for Volkswagen shares, "assuming that our estimates hold and the world isn't hitting a recession and/or Trump is taxing U.S. vehicle imports out of the market," the research firm notes. "The fact that China will lower import duties in a material way was almost unnoticed in light of what's going on in Washington," Evercore adds. (Max.Bernhard@dowjones.com; @mxbernhard)

(END) Dow Jones Newswires

June 01, 2018 04:20 ET (08:20 GMT)

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