Shares of Taiwan's biggest flat panel maker AU Optronics Corp (友達光電) yesterday plunged to their lowest level this year as overseas fund managers continued to sell on growing concerns that a glut of flat panels would hinder a rebound in panel prices.
AU Optronics shares fall by 1.94 percent to NT$40.5 yesterday on the Taiwan Stock Exchange as overseas investors sold another 13 million shares after unloading 43 million shares on Thursday.
"Dismal outlook from market researchers on the flat panel industry is deepening worries about a worse-than-expected glut dampening panel prices ," said Roger Yu (游智超), who tracks the LCD industry for Polaris Securities Co (寶來證券).
Supply of LCD screens measuring over 10 inches diagonally will exceed demand by 5 percent in the current quarter, compared to an earlier estimate of 3.8 percent. This is the result of disappointing demand for LCD televisions and computer monitors, iSuppli Corp said on Thursday.
The oversupply will get worse, exceeding demand by 6.2 percent next quarter, the industry researcher said.
AU Optronics had said in early August that demand for computer monitors would pick up in the second half.
The gloomy prospects for the sector triggered an across-the-board sell-off of local LCD screen-makers by foreign investors for the second straight trading session yesterday.
Overseas fund managers have cut their holdings in AU Optronics to around 47 percent as of Thursday, from 49 percent in the beginning of September, according to Taiwan Stock Exchange figures.
This has sent shares of AU Optronics down 18 percent as of yesterday.
They have also trimmed their holding of Taiwan's No. 2 LCD screen supplier Chi Mei Optoelectronics Corp (奇美電子) to 26 percent from 26.42 percent which has sent the company's share price down about 12 percent in the last month.
"We don't expect shares of AU Optronics and its local peers to rebound sharply in the near term, unless foreign investors start to buy those stocks," Yu said.
Earlier this week, Macquarie Research downgraded AU Optronics and Chi Mei Optoelectronics to "underperform" from on oversupply fears.
"LCD monitor demand is weakening while panel capacity ramps. This will result in weakening panel prices by the end of the fourth quarter of 2005" said Chris Hunt in the report released on Tuesday.
Price declines will follow in the first half of 2006, he forecast.
Bill Lan (藍新仁), a portfolio manger with Jih Sun Securities Investment Trust Co (日盛投信), said: "We had anticipated improving panel prices in the second half to boost the bottom line of local LCD panel suppliers.
"But, now we have to cut our earnings forecast as signs show the strength of a price rebound will be weaker than we thought," Lan said.