www.research.hsbc.comDisclosures&Disclaimer:ThisreportmustbereadwiththedisclosuresandtheanalystcertificationsintheDisclosureappendix,andwiththeDisclaimer,whichformspartofit.FixedIncomeAsiaCreditBy:HSBCAsiacreditresearchteamMay2019TheVIEWTheautomarketisfacingincreasingchallengesandagloomyoutlookglobally.Weseetechnology,capitalandscaleasthethreemostneededelementsforAsiaautocompaniesinthisdifficultenvironment.AlsoinsideForCreditStrategy,westaywiththeagilitythemeandexpectwidercreditspreadsfortherestof2019.Asiacreditsseemtoberunningoutofsteamfollowingtherecordreturnsin1Q19;meanwhile,theprimarymarketremainedactiveinAprilwiththehighestmonthlyissuancein2019sofar.Asia’sBondMarkets1FixedIncome●AsiaCreditMay2019Technology,capitalandscaleTheoutlookfortheglobalautomarketisfairlygloomy.Challengesincludeincreasinggeopoliticalrisks,tradeissuesandsoftsalesgrowth.Therippleeffectislikelytospreadacrossthesupplychain,impactingpartssupplyanddealers.Atthesametime,therapiddevelopmentofelectricvehicles(EV)andgovernments’tougheremissionstandardsarealsoputtingpressureonautocompaniesandpartsmakerstoinvestintechnologyandnewmodelstomeetthestandards.Becauseofthesefactors,Moody’slowereditsoutlookontheglobalautomarkettonegativefromneutralinMarchthisyear.Webelievetechnology,capitalanddiversifiedoperatingscalearethethreeessentialelementsneededinthisdifficultenvironment.Autocompaniesandpartsmakerswhichpossessallthreewill,inourview,beabletoovercomecurrentchallengesandevengrowtheirmarketshare.Advancedtechnologyandcapitalstrengtharerequiredtomakethenecessaryinvestmentinproductdevelopment.Atthesametime,companiesneedextensiveoperatingscales,intermsofproductionbases,supplynetworks,customermixandrevenuestreamstooffsetthemarketdowncycle.Inthisreport,weanalyseAsianautocompanies’operationalandfinancialprofilesandassesshowtheyareplacedintermsofthecurrentenvironment.MostofourcoveredAsiancompaniesareinrelativelystablepositions,andsomearepartlycushionedbytheirAsiaorChinacentricoperations.WelikeGeelyAutoandN...
