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在线翻译:
szdaily -> Markets -> 
Bears pile into short bets on mainland carmakers
    2018-08-21  08:53    Shenzhen Daily

SEVERAL mainland automakers are among the worst performers in Hong Kong’s equity markets this year, and their slump may be far from over.

Bets to go short BYD Co. soared to the highest in at least 12 years this month, according to IHS Markit Ltd. data, turning the Warren Buffett-backed Chinese manufacturer into the second-most shorted stock in the city. Bearish wagers on Brilliance China Automotive Holdings Ltd. are near the highest in more than six years. Since May, investors have also boosted short interest in Great Wall Motor Co. as a percentage of shares outstanding to a one-year high after their bets surged more than a year ago, Markit data show.

Bears are betting on a persistent drop in auto sales on the mainland due to a slowing economy, falling government subsidies and rising competition from foreign peers as China vowed to open up its auto market. The latest catalyst was the nation’s cut in the import duty on passenger cars effective July 1, which put pressure on the pricing of domestic models, according to Guotai Junan Securities Co.

Exacerbating automakers’ woes are concerns over the sustainability of joint ventures, as the government will allow foreign makers to take full ownership of the ventures.

“Uncertainties over mainland automakers are greater than anytime in the past, which is why short sellers are attracted,” said Toliver Ma, Guotai Junan analyst based in Hong Kong. “The whole sector’s margins and profits are falling, and people are worried about their sales in the second half.”

China’s car sales slumped for a second consecutive month in July as customers shied away from visiting showrooms amid the U.S.-China trade spat and an economic slowdown. According to Goldman Sachs Group Inc., Chinese automakers are rushing to cut prices and the price erosion level is close to 2015 when there was a severe pricing war.

“China’s rapid auto sales growth in the past years was driven by SUVs, but sales of such models fell for the first time in June and kept falling in July. That is a wake-up call,” said Vincent Hsu, fund manager at Fuh Hwa Securities Investment Trust Co., who fully unwound his stake in the sector at the end of last year.

Mainland automakers are due to report first-half earnings this month, with investors keeping a close eye on the companies’ third-quarter guidance in their statements.

“The outlook for the auto sector in the second half is bearish, so some investors chose companies with worrying sales prospects to short,” said Angus Chan, Shanghai-based analyst at Bocom International Holdings Co.

Brilliance China Automotive would get less profit contribution from its venture with BMW AG, as the latter is poised to become the first foreign car company to take majority control of its Chinese venture, Chan said. BYD, which heavily relies on government subsidies, may face a profit slowdown as China is said to weigh further cuts in electric vehicle subsidies, while Great Wall Motor, a major SUV maker, is battling with falling sales, he said.

Analysts’ views on the sector are sharply divided. Among the world’s major automakers, BYD, Brilliance China Automotive and Great Wall Motor have the widest price target gaps between the most bullish and bearish analysts, following Tesla Inc. Some analysts are still optimistic amid hopes that China may take measures to support domestic demand.

“China’s latest retail sales growth slowdown was partly caused by slowing auto sales, so I think there could be a government plan to boost consumption,” said Chris Hsu, portfolio manager at Allianz Global Investors Taiwan Ltd., who holds Brilliance China among his top 10 holdings. “If there is not such a plan, automakers should underperform this year.”(SD-Agencies)

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