CMO-Innolux merger expected to cast cloud over LCD-maker shares

Sending shock waves through the local panel industry, Innolux Display, a subsidiary of Hon Hai Precision, will merge with CMO, now the second-largest panel maker in Taiwan, and the merged firm will be named Chimei-Innolux Electronics and will surpass AU Optronics as the largest panel-maker on the island.

Market experts expected the share price of CMO to hit the daily seven-percent ceiling limit immediately after the market opens today, because of a 17 percent premium in the share price for CMO in the stock-swap merger deal.

But the merger news is expected to fuel bearish sentiment for other listed panel shares, with AU Optronics (AUO), now the largest maker in the line, to bear the brunt of the impact.

Chunghwa Picture Tubes Ltd. and HannStar Display, are likely to suffer less, as they have been no major rivals to the top two makers in the line. However, possibilities are increasing for the two smaller firms to be acquired by the top two makers, industry sources said.

Market analysts said that the CMO-Innolux merger and the bullish performance of the U.S. stock markets last Friday are expected to bolster the overall performance of the local bourse today.

General investors are expected to show high regard about how foreign institutional investors will interpret the impact of the CMO-Innolux merger case on AUO and other panel shares.

Last week, institutional stock investors recorded an over-buying position of NT$42.2 billion, which is deemed a major force to stabilize the performance of the local bourse. The approaching of the inking of the memorandum of understanding on cross-strait cooperation in financial supervision, and the imminent official talks on the Economic Cooperation Framework Agreement are seen to effectively fuel the bullish performance of relevant shares such as financials, plastics and shipping, according to market sources.

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