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September 23, 2017

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LCY shares rebound amid blame game with CPC

Despite an ongoing blame game with CPC Corp. (台灣中油) over responsibility for the gas explosions in Kaohsiung, LCY Chemical Corp. (李長榮化工) staged a technical rebound on Wednesday.

Shares of LCY Chemical rose 6.31 percent to close at NT$16.00 (US$0.53) with 19.98 million shares changing hands on the Taiwan Stock Exchange, whereas the weighted index on the Taiwan Stock Exchange ended up 0.74 percent at 9,231.31 points.

However, the chemical company still insists that CPC was responsible for "regularly checking and maintaining" the pipe. LCY Chemical claimed that anti-corrosion work on the pipe is currently done by King Mao Cathodic Protection Co. Ltd., which it says is a subcontractor of CPC Corp.

Despite the rebound in its share price, investors were advised to keep alert, as uncertainty over the amount of compensation LCY Chemical should shoulder remained pending an investigation into the cause of the blasts, the dealers said.

Before Wednesday's rebound, LCY Chemical shares had shed almost 40 percent since the Kaohsiung blasts.

The stock bounced back soon after the local market opened and momentum continued to push up its share price at the end of the sessions as bargain hunters became more active, the dealers said.

"In fact, the stock showed signs of stabilizing yesterday with losses narrowed after it fell below the market's maximum daily decline of 7 percent for seven consecutive sessions," Hua Nan Securities analyst Henry Miao said. Due to the seven maximum daily declines, market capitalization of LCY Chemical had dropped about NT$8.4 billion.

"Investors witnessed today's rebound in heavy trading volume as bargain hunters rushed to pick up the stock," Miao said. "The gains were simply technical in nature."

However, Miao said investors should remain cautious about the future movement of LCY Chemical shares despite Wednesday's rebound.

"The probe into the cause of the gas explosions has not ended yet. Few can be sure how much LCY Chemical will have to pay in compensation to the victims and for reconstruction of infrastructure damaged by the blasts," Miao said.

In addition, a plant of LCY Chemical located in Kaohsiung's Dashe District (大社工業區) has been shut down by the authorities after the explosions and Miao said there have been concerns that the shutdown will affect the chemical company's bottom line.

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