Fri, Nov 15, 2002 - Page 10 News List

Rumors trigger rise in AU stock

By Bill Heaney  /  STAFF REPORTER

Large private investors may have manipulated local media reports in an effort to push up the share price of Taiwan's largest manufacturer of flat-panel displays, analysts suggested yesterday.

A Chinese-language daily quoted AU Optronics Corp's (友達光電) president Chen Hsuan-bin (陳炫彬) as saying that demand for flat panels was up and that the drop in prices had stopped.

"Sometimes large private investors cooperate with local reporters to create some good or bad news. I think in this case they are trying to make the story more positive," said Frank Su (蘇穀祥), an analyst at BNP Paribas Taiwan.

Price has been a key concern in the flat-panel market, where excess supply and over-production issues dominate headlines. The story -- run by the Chinese-language Commercial Times -- was based on comments that were far from new. A source at AU Optronics told the Taipei Times yesterday that the news was made public at the company's third-quarter investor conference last month and that nothing had changed since then.

After the report broke yesterday, AU Optronics' shares took off at the open of the TAIEX. During the day's trading, shares in the company rose by as much as 6.8 percent to NT$25.1, but finally closed at NT$24.1 per share, 2.5 percent up on the previous day's close.

Investors that sold at the height of the day's trading gained handsome profits.

"Some are going to take their profits and run, because the share price won't hold at the present level," said Debbie Wu (吳岱玲), an analyst at Yuanta Core Pacific Securities Co (元大京華證券).

Wu had not read the report, but had been briefed on it. "I think the reporter should call to confirm the story," she said. "But then again, maybe the reporter is also an investor. Maybe AU Optronics was talking about one product in one sector to try and push up the average selling price across the board."

Both analysts said that the underlying trend is for a continued decline in flat-panel prices into next year.

"Panel prices are still on the way down, but the pace is likely to be slower than our previous prediction," she said. "This is because South Korea's fifth-generation capacity is coming on-line slower than expected.

"Lower prices have already stimulated demand, but I don't believe prices will rise," Wu said. "If anything, they will hold still for now."

Taiwan's largest competitors in the flat-panel display market are South Korea's Samsung Electronics Co and LG.Philips LCD. These two will start mass producing fifth-generation flat panels next year. A flood of new products from South Korea is expected to push prices lower.

AU Optronics' closest rival in Taiwan confirmed that prices have briefly stabilized.

"Demand is up," said Jeff Hsu (許庭禎), an official from Chi Mei Optoelectronics Corp (奇美光電). "Prices are stable for now. But if South Korean fifth-generation production comes on line, there will be an impact, although we can't yet say how much."

Su was more strident.

"Our view has not changed," he said. "We still think that prices will drop until the third quarter of 2002. I don't think the price has bottomed out.

"Our forecast was for US$170 this month and the price quoted in the [newspaper] report is US$165. That is very low, and it cannot be sustained," Su said.

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