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This article was originally published on ETFTrends.com.
Automaker stocks and car-related ETFs revved up as China considers halving its auto purchase tax to bolster its struggling automobile industry in the wake of the ongoing U.S. trade war.
Among the better performing automakers, General Motors (etftrends.com/quote/GM) was up 2.7% and Ford Motor (NYSE: F) jumped 4.3% after both falling off more than 20% this year. CARZ includes a 8.0% position in GM and 7.6% in F.
China's National Development and Reform Commission has outlined a plan to reduce the purchase tax to 5% from 10% on vehicles, which would be applied to cars with engines no bigger than 1.6 liters, according to Bloomberg. However, no decision has been made.
"This news is very positive as it removes a large part of the negative sentiment towards the group, driven by China risk," Arndt Ellinghorst, an analyst at Evercore ISI said in a note, according to Business Insider. "If China stimulus is confirmed, we expect Auto stocks to show strong positive momentum into year-end."
The China Automobile Dealers Association also previously submitted documents to the country’s finance and commerce ministries to propose the auto purchase tax be halved to 5%.
“From a China perspective, the extension of a purchase benefit (could) help to alleviate some of the trade dispute overhang, and is likely contributing to stocks performance today,” Consumer Edge Research analyst James Albertine told Reuters.
Separately, Goldman Sachs upgraded Ford to "buy," pointing to the company's refreshed product line and cost cutting initiatives.
"While we still expect a downward earnings trajectory into 2019 (North America profit under-pressure), we believe next year will represent trough earnings and the combination of a refreshed product cadence globally as well as cost improvements from strategic initiatives will begin to take hold," analyst David Tamberrino said in a note, CNBC reports.
For more information on the car industry, visit our automobiles category.