As China’s car sales surge, Singapore-listed auto parts suppliers with operations in the country like Amtek Engineering (AMEL.SI), which manufactures precision engineering, plastic and rubber components, are basking in market attention.

Shares of Amtek, which plans to double the space at its production plant in Shanghai to around 72,000 square metres in the next two years to tap on the increasing demand for cars, have risen about 25% so far this month.

 

The firm was delisted from the Singapore bourse in 2007 after being bought out by private equity firm CVC Capital (CVC.UL) and a unit of Standard Chartered (STAN.L), and made a come-back on Dec 1.

 

Car sales in China rose 33.2% in 2010, securing the country’s position as the world’s biggest automotive market for the second straight year, official data showed.

 

“China will continue to be a large and growing automotive market. And with global automakers lining up to set up manufacturing plants in China, I expect prospects for the industry to remain strong,” said Gregory Yap, a Kim Eng analyst.

 

Other Singapore-listed car parts suppliers are Armstrong Industrial (ARMS.SI), which manufactures foam and rubber parts used for cushioning in car doors, and Cheung Woh Technologies (CHWO.SI), which produces components like car seat recliners.

 

Shares of Armstrong Industrial are flat so far this month but rose 72% last year. Cheung Woh stock has gained around 37% since the start of 2010.

 

DBS Vickers has started coverage on Amtek with a "buy" rating and a $1.65 target price, against its current price of S$1.35.

 

“The emphasis on automotives in their business is one of the factors that have been driving their share prices,” Yap said.

 

However, he cautioned that the growth pace of car sales in China this year is likely to slow down as the financial incentives to spur consumers to either buy new cars or upgrade their existing vehicles will be withdrawn.