KUALA LUMPUR (Jan 6): Kenanga Investment Bank Bhd maintained its "underweight" stance on Malaysia's automotive sector as "underperform" ratings dominated automotive stocks under its coverage.

In a note today, Kenanga said its sector stance also took into account the lack of re-rating catalyst for 2017, rising cost and poor consumer spending.

"We maintain our underweight rating on the automotive sector given the outweighing of underperform ratings in the total market capitalisation of our stock coverage coupled with the lack of re-rating catalyst for 2017 as well as rising costs and poor consumer spending," Kenanga said.

Kenanga's automotive stock coverage comprises Bermaz Auto Bhd, DRB-Hicom Bhd, MBM Resources Bhd, Tan Chong Motor Holdings Bhd and UMW Holdings Bhd.

According to Kenanga, the research firm has "underperform" ratings on DRB-Hicom, MBM, Tan Chong and UMW while Bermaz has an "outperform" call.

Kenanga's note today followed the Malaysian Automotive Association's (MAA) announcement on the sector's November 2016 numbers.

Figures from MAA showed total industry volume (TIV) during the month dropped 12% to 49,085 units from a year earlier. In monthly terms, TIV rose 3%.

November TIV brought the cumulative 11-month figure to 515,293 units. Today, Kenanga said the cumulative TIV made up 90% of its full-year forecast of 580,000 units.

"Stronger (on-month) sales this month was expected given the wide range of models launched in prior months on top of the aggressive sales campaigning by auto players during the year-end period to make up for the slow sales during the year.

"However, our view remains conservative given the prevailing weakness in consumer sentiment as well as the unfavourable import costs that are corroding automakers profitability, the lack of rerating catalysts for the sector," Kenanga said.