China's Auto Stocks Cast off Dull Images

China's auto stocks have been rallying since May, with Zhongtong Bus (000957:SH) increasing by 10.1% on Tuesday, BYD (002594:SZ) growing 5.76% and Li Auto (2015:HK) elevating 9.57%.

The auto sector has been underperforming since the beginning of 2022, with the auto industry benchmark Shenwan Hongyuan Auto Index once dropping 20% of its value year-to-date. China's A shares have also witnessed a 15% decline.

As the whole market surged in May, the automobile sector also ushered in a sharp rebound. On May 11, over ten auto parts players touched the upper trading limit. Last Friday saw carmakers Changan Auto, Great Wall Motor and Huawei's EV making Partner Sokon meet the daily limit.

The industry observer believed the easing Covid-19 control measurements, declining raw material prices along with rumors of new incentives for boosting rural car sales all serve to alleviate the pressure on China's auto clusters.