FAW surges on procurement report

FAW Car Co. jumped the most in more than four years in Shenzhen trading on speculation the Chinese automaker will benefit from increased government purchases of domestic vehicles.

FAW surged by the 10 percent daily limit as of 11:13 a.m. local time, poised for the biggest gain since Nov. 19, 2008, to 8.34 yuan. SAIC Motor Corp., the largest automaker, advanced 3.4 percent to 15.40 yuan. Beiqi Foton Motor Co. added 3.3 percent to 6.63 yuan. The Shanghai Composite Index (SHCOMP) rose 1.8 percent, while the Shenzhen Composite Index gained 2 percent.

Over 10 Chinese provinces and central goverment departments have procured “large batches” of China FAW Group Corp.’s Red Flag H7 cars, the official Xinhua News Agency reported yesterday, citing Xu Xianping, its general manager. China should order foreign automakers to contribute more to develop local brands and limit those whose sole aim is to win more sales, FAW Group, parent of FAW Car, said March 5.

“The news of the government’s plan to purchase more domestically made Red Flag cars is boosting automakers,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages $120 million. “Domestic car makers are going to benefit from government procurement. Today’s rally is also a re-rating of investors’ pessimistic view about auto sales outlooks. Things are actually not as bad as they expected.”

Chinese automakers have been urging the government to take more steps to protect homegrown companies, which are facing intensifying competition from foreign manufacturers expanding in the world’s largest vehicle market. Competition for market share is poised to intensify as foreign automakers led by General Motors Co. (GM) and Volkswagen AG step up their push into smaller cities traditionally dominated by local brands.

Wholesale deliveries may gain 7 percent this year to 20.65 million units, led by demand for passenger vehicles, the statebacked China Association of Automobile Manufacturers said in a statement in Beijing on Jan. 11.