TAIEX declines, UMC shares fall on inventory worries

Stocks declined, led by semiconductor makers, after Citigroup Inc said shares of United Microelectronics Corp (UMC, 聯電) may fall on concern chip inventories will peak this quarter.

"The semiconductor sector is badgered by inventory and lackluster demand," said Barro Liao (廖國峰), a fund manager at Prudential Securities Investment Trust Co (保誠投信) in Taipei.

The TAIEX shed 5.29, or 0.1 percent, to 5,852.85. About three stocks gained for every two that declined. Index futures for September shed 0.3 percent to 5,840.

UMC, the world's second largest supplier of made-to-order chips, fell 3 percent to NT$22.60, while rival Taiwan Semiconductor Manufacturing Co (台積電) lost 2.6 percent to NT$45.90.

The two stocks declined after a Chinese-language newspaper reported that these two leading wafer foundries are planning to offer discounts of around 5 percent in their average selling price (ASP) to some of their clients, dealers said.

UMC denied the report, while TSMC declined to comment.

UMC shares traded in the US may drop below US$3.60 in the next six months, Andrew Lu (陸行之), a Taipei-based analyst at Citigroup, wrote in a report. The stock closed in the US at US$3.83 Wednesday.

Many of UMC's Taiwanese customers "expect their inventories to peak in the third quarter," he wrote.

China Development Financial Holding Corp (中華開發金控) fell 2.6 percent to NT$14.8 on news that the Taiwan Stock Exchange has decided to scrutinize its first-half earnings report after the company cut its 2004 earnings forecast to a loss.