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Business

Malaysia's vehicles sales remain weak in October

KUALA LUMPUR (NewsRise) - Malaysia's vehicle sales declined again in October amid persistent tepid consumer sentiment and a weak ringgit, underscoring the pain of automotive companies, which analysts cautioned could stretch well into 2017.

Total industry volume fell 14% to 47,879 units in October from 55,788 units during the same month last year, according to data from the Malaysian Automotive Association. On a month-on-month basis, sales slipped 0.6% from 48,191 units in September.

"Sales volume for November is expected to be slightly better than October" as car companies continued to roll out aggressive marketing campaigns, the association, also known as MAA, said.

Still, analysts said MAA, which represents over a dozen of manufacturers, importers and retailers, may miss its own annual sales forecast of 580,000 units despite a slew of aggressive marketing campaigns. Year-to-date, sales plunged 14% to 466,208 units in October.

"There is some downside risk to MAA's forecast," said TA Securities' analyst Abel Goon. "In order to reach this target, average sales volume should amount to at least 56,900 units over the next two months... we believe this is a tall order."

Malaysian households have been cutting back on purchases of big-ticket items, such as vehicles and real estate, amid a sluggish growth in the Southeast Asia's third-largest economy where cost of living is edging higher.

The Consumer Sentiments Index, which surveys over 1200 households' outlook on topics including their financial positions and employment, fell five points to 73.6 in the third quarter from the second quarter, according to the Malaysian Institute of Economic Research.

"Entering 2017, the sector is expected to continue being undermined by the on-going weak consumer sentiment as well as weakening of ringgit," said Hong Leong Investment Bank's analyst Daniel Wong.

Automotive companies in Malaysia, including DRB-Hicom, have been facing margin pressure as cost of foreign vehicles and imported components rose with a declining ringgit. In this month alone, the Malaysian ringgit has tumbled more than 5% against the U.S. dollar.

"More aggressive promotions driven by stiff competition coupled with high input costs due to the prolonged ringgit weakness against major currencies will continue to crimp margins," said UOB Kay Hian's analyst Fong Kah Yan.

DRB-Hicom, which owns Proton Holdings and assembles vehicles for foreign brands including Honda and Mercedes Benz, partly blamed unfavorable foreign exchange for hurting automotive business and widening its net loss to 163.3 million ringgit in the fiscal first quarter ended June 30.

Shares of DRB-Hicom fell 1.6% to 1.20 ringgit while the benchmark FTSE Bursa Malaysia KLCI ended 0.2% higher.

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