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ASE's controversial factory to reopen soon: analysts

TAIPEI, Taiwan -- Word spread around the local market on Friday that the K7 factory of Advanced Semiconductor Engineering Inc. (ASE, 日月光半導體) will soon be approved by the Kaohsiung City Government to resume operations.

Spurred by the market hearsay, ASE's shares yesterday rose NT$2.1, or 6.94 percent, near the maximum daily increase of 7 percent, to NT$32.35, hitting a 31-month high.

The news about the K7 factory's restart came on the heels of the review of ASE's K7 restart petition to the Kaohsiung City Government yesterday. However, ASE denied that they received K7 resumption approval or notification of any sort from Kaohsiung authorities, according to the United Evening News.

ASE said that it is does not know when K7 will reopen since it's up to the Environmental Protection Bureau of the Kaohsiung City Government to make the final decision, adding that all it can do is continue to improve its environmental protection efforts.

It has been three months since the K7 factory was ordered to partially shut down on Dec. 12, 2013.

United Evening News cited share market analysts' view that it is still debatable whether or not ASE will be held fully responsible for the subterranean pipelines that illegally discharged wastewater. A lack of evidence highlights uncertainties about whether or not ASE discharged toxic matters in secret, thus the imminent resumption of K7 can be expected, analysts said.

ASE is the world's largest integrated circuit packaging and testing services provider. In late December 2013, ASE was ordered to shut down part of its operations at the K7 plant after the factory was found to be releasing waste water into a river in Kaohsiung.

Buying Reflects Optimism Toward ASE's Earnings Outlook

ASE shares moved sharply higher on Friday as bargain hunters rushed to take advantage of its relatively low valuation, the Central News Agency (CNA) cited dealers as reporting.

The buying reflected optimism toward ASE's earnings outlook as the global semiconductor business is forecast to stage a strong technical rebound after inventory adjustments, Ta Ching Securities analyst Andy Hsu told the CNA.

According to the Taiwan Stock Exchange, foreign institutional investors held an 80.39-percent stake in ASE as of Thursday. In Thursday's trading session, foreign investors bought a net 4.33 million in ASE shares.

ASE has said that the first-quarter sales from its IC packaging and testing operations are likely to fall by a quarterly 12-15 percent, while the partial shutdown at the K7 plant could drag down its revenue from the IC packaging and testing operations by 4-5 percent. But Hsu said ASE assessments tend to be cautious.

According to Hsu, ASE's first-quarter sales are likely to exceed its forecast on solid demand for communications devices in that ASE is one of the local suppliers to Apple Inc. and has benefited from sales of the latest version of the iPhone.

With Apple's expected launch of its next-generation iPhone later this year, ASE will regain its footing and see a bounce back in sales in May or June, Hsu forecast.

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