Japan's automotive sector is likely to see benefits this year from having the world's biggest auto market as its neighbor, with parts makers among those poised to impress investors, analysts said.
"We believe structural growth in the Chinese automobile market provides opportunity for growth for the Japanese automobile industry," analysts at Macquarie said in a recent research note.
And in Japan, auto parts makers are likely to have "more direct plays" on the Chinese market, given the "more lax Chinese government ownership regulations for the auto-parts makers as compared to the auto assemblers," they said.
China surpassed the U.S. to take the title of the world's biggest automobile market in 2009, with total vehicle sales of more than 13 million units.
Obviously, the Chinese market has seen rapid growth," the Macquarie analysts said.
Among the auto parts makers poised to benefit from that growth are Toyota Boshoku Corp., Mabuchi Motor Co. and Sumitomo Metal Industries Ltd., they said.
But for now, shares of those companies headed lower. By the end of the morning trading session in Tokyo, shares of Toyota Boshoku were down 1.3%, Mabuchi Motor lost 1.6%, and Sumitomo Metal Industries was 1.9% lower.
The moves defied the modest rise in the broader stock market, with the Nikkei 225 Average up 0.3%, and the Topix adding 0.1%.
Elsewhere in the region, trading was mixed, with China's Shanghai Composite down 0.9%, while Hong Kong's Hang Seng added 0.2%. Australia's S&P ASX/200 lost 1.6%, South Korea's Kospi tacked on 0.1%, and Taiwan's Taiex rose 0.4%.
China gives Japan a hand
Overall, "China is profoundly bullish for Japanese equity investors, not just in terms of the demand opportunity for Japanese companies, but also because of the requirement to be intensively competitive to succeed," Macquarie analysts said.
And one area where this especially holds true is the Chinese auto market, they said.
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