China effect hits automobile sector

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In July, sentix Sector Sentiment for Europe’s automobile stocks falls more strongly than for any other sector. It is the sorrows concerning a fading demand from China, spurred by the latest market turbulences, which can be felt here. But the positive trend in automobile stocks is still not to be put into question.

sentix Sector Sentiment for Europe’s automobile sector falls by 1.2 to only -0.36 standard deviations (see “background”). This is an extraordinary setback, in the current month no other sector suffers more strongly. For automobile shares investors now expect an underperformance over the next six months.

20150713 iif autos eng

An important reason for the worsening in sentiment can be found in the growth market China. There, authorities have – also against the backdrop of the latest stock exchange turbulences – significantly lowered their forecasts for new car sales. But the current consolidation which can be observed in the relative performance of European automobile stocks still looks constructive (see graph). Consequently, we see the cooling in sentiment – which was heavily influenced by the panic-like reaction at the Chinese equity markets – as an opportunity. Thus, the positive trend in Europe’s automobile stocks is – from a sentix point of view – still not to be put into question.

Background

sentix Sector sentiment is a monthly survey being conducted since 2002 among individual and institutional investors via the internet. The survey is run around the second Friday of each month. Investors are asked about their six-month expectations regarding 19 European stocks sectors. They can indicate whether they expect a sector to outperform, to perform as the market or to underperform. The survey results are normalised over all sectors and calculated as so-called z-scores. Z-scores are standard deviations from the mean of a given sample. A value of +1 for a sector sentiment means, for instance, that the expectations for the sector stand one standard deviation above the mean expectation for all sectors.

The current sentix Sector Sentiment survey was conducted from July 09 to July 11, 2015. 992 individual and institutional investors took part in it.

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