Investment Highlights

• We are NEUTRAL on the sector on expectation that TIV will stabilise to historical norms in 2024. Valuations are balanced with Bermaz Auto (BAUTO) as our sole BUY.

• The Japanese Yen (JPY) had an extremely volatile session yesterday (29 April 2024). It first depreciated to >JPY160 against the USD in early morning trade, which is a 34-year low, and then swiftly depreciating and closing to JPY156.35/US$ by the end of the day. The RM gained marginally against the JPY and the volatility was less severe.
   
• It was a holiday in Japan and the volumes traded were thin as no major institutions were involved. Nonetheless, it
  sparked speculation that the Bank of Japan has intervened to support the JPY and hence prompted currency
  traders to square-off their positions. There was no official statement by the authorities, and therefore this is just an
  unconfirmed rumour.
   
• The gaping difference in borrowing costs in Japan and the US, which is currently at 3.72% and well above its
  historical mean (EXHIBIT 3) is promoting “carry trade” and driving the JPY lower (see EXHIBIT 4). The RM is a victim
  of the carry trade as well against the USD but RM has strengthened against the JPY, year-to-date it is up by 5.7%
  YoY.
   
• A weak MYR is generally bad for Malaysian autos as many components and parts are imported mainly from
  Thailand, Japan and South Korea, and they are denominated in USD or JPY. Most of the players hedge currency
  positions by buying 3-6 months forward, assuming swap rates are favourable.
   
• Our FX sensitivity analysis is shown in EXHIBIT 4.
   
  • the most sensitive to MYRJPY fluctuation is BAUTO, and
  • the least sensitive to MYRJPY fluctuations are Sime Darby (more sensitive to USD and AUD) and MBM.

Source: AmInvest Research - 30 Apr 2024