Credit Suisse raises Asian technology stocks' ratings

Asian technology stocks, including Samsung Electronics Co, the world's biggest maker of memory chips, and United Microelectronics Corp (UMC, 聯電), were raised to "overweight" by Credit Suisse First Boston, which said the sector will grow next year. Shares of Samsung and UMC rose.

Technology companies had their worst earnings growth this year and price-to-earnings ratios are near all-time lows, Hong Kong-based analysts Stewart Paterson and Peggy Chan wrote in a report dated yesterday.

In the past month, technology shares were the best performers on the Morgan Stanley Capital International Asia Pacific Index, rising 11 percent against a 7.4 percent gain for the index.

Taiwanese technology companies, which account for half the market capitalization of the industry in Asia, "have the potential to drive the sector's out-performance in 2006," said Credit Suisse, which upgraded the Asian technology industry from "neutral."

Outperform

Credit Suisse has "outperform" ratings on Taiwan-based companies including

UMC, the world's second-biggest maker of made-to-order chips, the No. 1 maker of chips for DVD players Mediatek Inc (聯發科), and Siliconware Precision Industries Co (矽品), the country's second-largest semiconductor packager.

The brokerage also kept its "outperform" rating on South Korea-based Samsung and raised its 12-month price target to 700,000 won (US$670) from 630,000 won, citing demand for the NAND flash chips that the company supplies to Apple Computer Inc for its iPod music players.

Shares of Samsung rose 0.2 percent to close at 608,000 won in Seoul yesterday.

UMC' stock gained 2.4 percent to NT$19.30 and Siliconware Precision's shares were unchanged at NT$34.60, while Mediatek's stock lost 0.8 percent to NT$325.5 in Taipei.

Contrarian view

But analyst Frank Wang at Morgan Stanley downgraded Powerchip Semiconductor Corp (力晶), the country's largest memory-chip maker, and smaller rival Nanya Technology Corp (南亞科) to "equal-weight" from "overweight."

Wang reduced his target price for Powerchip to NT$20 from NT$27, recommending investors sell on the expected year-end technical rallies.

The Morgan Stanley analyst cut his target price for Nanya to NT$19 from NT$28, following a decision by the chipmaker's venture partner Infineon Technologies AG's to exit the memory-chip business.

The market could "view this as casting doubt on DRAM trench technology's long-term viability, which may be negative for Nanya [in the] short term," Wang said in a report yesterday.

Most of Nanya and Infineon's rivals use a so-called stack technology in making memory chips.

Wang, who has an in-line view of the memory-chip industry, said dynamic-random-access memory will become a better investment by the second quarter of next year, ahead of a cyclical recovery in 2007.

Powerchip lost NT$0.05, or 0.3 percent, to NT$18.20. Nanya Technology added NT$0.15, or 0.9 percent, to NT$17.20 in trading in Taipei yesterday.