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LCY Chemical shares stage strong rebound

TAIPEI -- Shares of LCY Chemical Corp. (李長榮化工) staged a strong technical rebound Wednesday after a recent plunge caused by concerns over the impact of a series of gas explosions in Kaohsiung for which the company has been blamed, plus heavy losses recorded for the first half of this year, dealers said.

However, as uncertainty over compensation for the victims and property damage in the July 31 blasts that killed at least 30 people and injured more than 300, continued to haunt LCY Chemical, its shares could trend lower after the rebound, the dealers said.

A leak in an underground LCY pipeline carrying propylene is believed to be the cause of the Kaohsiung explosions, although an investigation into the cause is still under way, they added.

Shares of LCY Chemical gained 7 percent, the maximum daily increase, to close at NT$13.35 (US$0.45) with 11.08 million shares changing hands, while the weighted index on the Taiwan Stock Exchange ended up 0.47 percent at 9,288.05 points.

Despite the latest gains, LCY Chemical shares have fallen more than 46 percent since the explosions. Since July 31, market capitalization of LCY Chemical has dropped by more than NT$9.9 billion.

“As the probe into the cause of the blasts has not been completed, worries over massive compensation LCY Chemical might have to shoulder remain in place,” said Ta Ching Securities analyst Andy Hsu.

“I would prefer to say today's gains were simply technical in nature,” Hsu said. “The stock could come under pressure over the next few sessions,” he added.

In addition to the concerns over LCY Chemical's compensation, investor sentiment has been spooked by the company's large net loss for the first half of this year, the dealers said.

In the six-month period, LCY Chemical incurred NT$7.8 billion in net losses compared with NT$389 million in net profit in the same period of last year. Its loss per share in the first half of this year was NT$9.20, compared with NT$0.46 in earnings per share in the same period of last year.

The petrochemical company said the heavy losses in the first half came after it recorded more than NT$8 billion in losses from its investments in the solar energy industry.

Investors are also worried about LCY Chemical's operations, since one of its plants located in Kaohsiung's Dashe District was ordered to close following the explosions, the dealers said. The company said it is examining its pipelines to improve safety and hopes the Dashe plant's operations can resume as soon as possible.

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