Banking Sector
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Limited effect from first-car ownership period unlocking Rec : NEUTRAL Neutral
Banking Sector
- First-car ownership period to be shortened to three years
Director-general of the Excise Department discussed a guideline in unlocking an ownership condition for cars under a first-car scheme with all manufacturers on August 31. It has been proposed that the minimum ownership period before the cars can be transferred or sold should be shortened from five years to threes years in order to boost domestic car sales, which have dropped from 1 million cars/year to only 700,000 cars/year at present. Around 600,000-700,000 cars in the project have already reached three years ownership period; if the unlocking is approved, around 10% or 60,000-70,000 of those cars would be sold for new cars, which would encourage car sales at the end of the year. A conclusion from the discussion will be submitted to the Finance Minister for consideration by September. Another issue discussed is a strategy to deal with an increasing number of used cars in the country after the unlocking, especially car export, to spare used car dealers and car leasing entrepreneurs from an adverse effect from selling repossessed cars to repay debt.
- Limited effect on TISCO, TCAP, KKP, BAY, SCB
This issue will have an impact on domestic used car market again, but not as significantly as the first-car scheme in 2012, which had caused the market price of used cars to drop 20-30% on average. Since the price has started to stabilize for a while, there is not much downside now. Moreover, owing to the slowing economy, a demand of lower-end consumers for used cars is still higher than new cars. In addition, if selling of used cars can help boost sales of new cars as studied, it would help alleviate the effect as new car leasing of TISCO (63%), TCAP (54%), KKP (47%), BAY (20%), and SCB (9%) would improve. Used car export to neighboring countries, in which demands are still high, is another positive factor for local used car market.
- Top picks are KBANK, TCAP
NEUTRAL recommendation is reiterated for the sector. We like KBANK(FV@B232) for its good loan and revenue diversification and TCAP([email protected]) for its stronger asset quality and capital base and better net profit growth than the sector’s average in 2015-2016.
