Sun, Jul 18, 2004 - Page 10 News List

Asian chip stocks slide as Tokyo Electron falls

BLOOMBERG

Asian semiconductor-related stocks fell this week on concern earnings growth will slow after Intel Corp said profit margins would fall and Merrill Lynch & Co cut its rating on the industry. Tokyo Electron Ltd paced declines.

The Morgan Stanley Capital International Asia-Pacific Index, which tracks more than 900 stocks in the region, shed 0.3 percent to 90.14 this week, its third decline. The MSCI Asia-Pacific Information Technology Index slid 3.1 percent.

"Going into the second half of this year, earnings of technology companies are likely to lose momentum," said Naohiko Sasaki, who oversees US$31 billion as co-head of investments at Kokusai Asset Management Co in Tokyo. Demand "is disappointing and making us stay away from technology stocks." South Korea's Kospi index shed 1.1 percent for the week, its sixth weekly drop in seven. The TAIEX slid 4.8 percent, the biggest weekly decline since the week ended June 4.

All benchmarks in the region fell for the week except for Japan, Singapore, India, mainland China and New Zealand.

JAPAN

Japan's Nikkei 225 Stock Average gained 0.1 percent and the broader Topix climbed 0.4 percent, buoyed by banking stocks after Mitsubishi Tokyo Financial Group Inc, the nation's largest bank by market value, and UFJ Holdings Inc, the fourth biggest by assets, agreed to start merger talks. Mitsubishi Tokyo surged 11 percent for the week. UFJ gained 2.8 percent.

Intel, the world's largest chipmaker, said Wednesday gross margin, or the percentage of revenue left after subtracting the cost of goods sold, will be about 60 percent this year, compared with a previous forecast of about 62 percent because it's cutting prices to reduce inventories.

Merrill Lynch earlier in the week recommended investors sell chip shares on concern earnings growth is slowing. Novellus Systems Inc, whose equipment builds circuits in computer chips, said orders missed its own forecast.

"Earnings momentum for technology companies seems to be peaking," said Nobuki Goto, who helps manage US$14 billion at Tokio Marine Asset Management Co in Tokyo.

"Demand isn't keeping pace with production," Goto said.

Tokyo Electron, the world's second-largest maker of semiconductor production equipment, fell 4.6 percent, its biggest weekly loss in a month.

Chartered Semiconductor Manufacturing Ltd, the world's fourth-largest supplier of made-to-order chips, plunged 9.5 percent, its largest weekly drop since the week ended April 30.

Andrew Lu, an analyst at Citigroup Inc's Smith Barney unit, and Merrill Lynch's Daniel Heyler cut the stock to "sell" from "buy." Taiwan Semiconductor Manufacturing Co (台積電), the world's largest supplier of made-to-order chips, slipped 7.6 percent. United Microelectronics Corp (聯電), the second largest, lost 4 percent.

Citigroup's Smith Barney unit recommended investors to sell shares of both.

SAMSUNG

Samsung Electronics Co, the world's No. 2 semiconductor maker, fell 0.2 percent, narrowing a loss of as much as 5.8 percent. The company said Friday second-quarter earnings more than tripled and that it would pay an interim dividend that's 10 times more than a year ago.

UFJ, the only lender among Japan's four largest banks to post a loss last fiscal year, said Wednesday it would seek a merger with Mitsubishi Tokyo. Mitsubishi Tokyo has the lowest bad-debt ratio of the four banks.

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