News of possible tax benefit boosts automotive shares
The price of automotive stocks rose significantly on Tuesday (August 25) over hopes of the government’s moves to offer personal income tax reductions for new car buyers, experts said.
With this belief, the Stock Exchange of Thailand (SET)’s automotive group index rose by 4.92 points or 1.51 per cent to 329.98 with transactions totalling more than Bt113 million at Tuesday’s closing.
However, the tax incentive was not on the Cabinet’s agenda on Tuesday.
Automotive stocks that have risen sharply were Ingress Industrial (Thailand) (INGRS), which rose by Bt0.05 or 12.82 per cent to Bt0.44 with transactions totalling Bt1.94 million, followed by Somboon Advance Technology (SAT), which rose by Bt0.50 or 4.55 per cent to Bt11.50 with transactions worth Bt49.21 million, and AAPICO Hitech (AH) that rose by Bt0.35 or 4.22 per cent to Bt8.65 with transactions of Bt39.01 million.
Amnart Ngosawang, senior director at KTB Securities (KTBST), said the price of automotive stocks rose due to mass buy-ups among investors on hopes over the government’s move to issue personal income tax reduction measures for new car buyers.
“Automotive stocks gained from this factor because it will help boost automobile production this year to 1.3 million vehicles, though it is still lower than last year’s 2 million vehicles,” he said.
However, he added that his company’s research department has evaluated that these measures will not help boost the stock price by much.
"For example, if a car is priced at Bt1 million and the tax base is 20 per cent, the buyer will only get a tax reduction of Bt40,000, accounting for 4 per cent of the car’s price. This amount is already granted by car dealers in discounts,” he explained.
"However, if the government issues more measures to help the automotive industry, the price of automotive stocks may rise further."
He said he expects the automotive industry’s performance in the second-half to recover gradually.
"In the third quarter of this year, the automotive industry's production is expected to recover after many factories were closed in the second quarter to contain the spread of Covid-19, causing the industry's performance to fall to its lowest this year,” he said.
He added that the securities company still gives a lower weight to automotive stocks because they will not generate much profit this year.
"If the government issues these measures, the price of these shares will not increase much because its price already responded to the news," he added.
Meanwhile, Pasakorn Wangvivatchareon, research director at Asia Plus Securities said, said offering personal income tax reduction to new car buyers will help stimulate the demand for cars in the country and benefit automotive industry entrepreneurs.
"However, the details are still unclear, and it may not boost domestic sales much because the economy is still in its recovery period,” he said.
His securities company is also giving automotive stocks lower weight than the market because the industry's production is pressured by the state of the economy.
