Mon, Feb 21, 2005 - Page 10 News List

Prospects dim in key sectors: analyst

GRIM OUTLOOK Despite continued inflows of foreign cash from investors looking to take advantage of the strengthening NT dollar, analysts see hard times ahead

By Amber Chung  /  STAFF REPORTER

Prospects for the nation's electronics industry in the first half of this year look duller than expected, despite continued foreign inflows in the past week that have snatched up electronics shares, a senior equity analyst at Nomura Securities said.

"We cannot see enough exciting factors in the fundamentals of the electronics industry to bolster the sector's optimistic expectation" for the first half of the year, Ben Lee (李柏彥), head of equity research with Nomura Securities Co Taiwan branch, told the Taipei Times in an interview on Friday.

The liquid-crystal-display (LCD) panel industry, for example, may see weaker-than-expected market demand in the first half, in light of a stockpiling of panels at downstream companies such as computer monitor makers, Lee said.

The seemingly active demand in the first quarter is mainly boosted by these downstream companies' overbooking against falling panel prices, he added.

AU Optronics Corp (友達光電), the world's No.3 LCD panel maker, told investors last week that it expected to see supply and demand come into balance in the first quarter and a moderate supply surplus of 2.5 percent in the second quarter, following mass production at several panel makers' new plants.

The Japanese securities house estimated that global panel supply will reach around 88 million units in the first half of the year while the market demand will only be 70 million units.

With the resulting 18 million units of overcapacity, the sector's supply glut is now forecast to be much worse than the industry had previously predicted, the analyst said.

The semiconductor sector is also facing a grim future, Lee said.

Global motherboard shipments in the first quarter are expected to drop by 10 percent from the previous quarter, while notebook shipments could decline by as much as 20 percent in that period, Nomura Securities estimated.

Such weak market demand plus potential inventory issues persisting from the last quarter signals even more uncertainty in the traditionally slow second quarter, Lee said.

As a result, "we tend to be neutral, or even conservative," about the performance of the local bourse in the first half of the year, he said.

The TAIEX closed up 43.27 points, or 0.71 percent, at 6,115.43 on turnover of NT$$86.40 billion (US$2.73 billion) Friday, driven by continued foreign inflows for Taiwan stocks as well as a technical rebound led by United Microelectronics Corp (聯電) amid alleged illegal investments in China.

The nation's stock market saw record net buying of NT$20.45 billion by overseas investors Monday, the first day the bourse reopened after the Lunar New Year holiday. For the past week, net purchases by foreign investors totaled NT$41.8 billion, according to the Taiwan Stock Exchange.

Foreign investors are pumping money into the TAIEX to seek exchange gains, betting that the NT dollar may further strengthen against its US counterpart.

"Compared to other Asian currencies, the NT dollar still has room to appreciate against the greenback," Lee said.

Overseas investors may take profits and leave the local market if the NT dollar stops strengthening, he said, adding that the scheduled re-weighting of the TAIEX by MSCI in May may reduce the appeal of the country's stocks for foreign investors.

Another uncertainty facing the local bourse is companies' earnings reports for last year plus their first-quarter reports, Lee said.

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