China’s passenger car sales in Aug ’09 surged 90.18% yoy and 3.1% qoq to 858,300, underpinned by the government’s stimulus measures such as aggressive cuts in sales tax and rebates for buyers in rural areas.

Overall vehicle sales also surged 81.7% yoy to 1.14mln units, much faster than July ’09’s 63.6% growth rate.

What is more significant is that even demand for larger vehicles which do not benefit from government stimulus measures has recovered, signalling real demand returning.

GM’s Aug ’09 sales surged a better than expected 113% yoy resulting in the President and MD for its China operations to raise his previous forecast made in July ’09 from 20% growth in 2009 to 40% currently.

GM is a major customer of Armstrong in China and the above positive news will continue to underpin Armstrong’s automotive business in China. This suggests upside surprises for Armstrong’s automotive business in 3Q ‘09. We maintain BUY on Armstrong.