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Market Trend

Global Warming Cools down Economies, so Panel Makers Endure
Published Nov.05 2015, 05:31PM (GMT+8)

According WitsView's latest statistics, Market Confidence Index (MCI) increased 49.9 points, from 4177.5 points to 4227.4 points during the period from October 7th to November 5th, 2015. The United States' economy has become weak. In September, affected by gasoline price drop, US' CPI dropped 0.2% compared with the CPI in August. However, weak income had offset the possible increase of consumer spending capability which was caused by the falling CPI. In September, the United States' unemployment rate was 5.1%, and its wage level remained the same YoY, but the wage level was down from 0.4% to 0% QoQ. Labor force participation rate dropped for the first time after four months, down from 62.6% to 62.4%, which was not a good sign for the already shrinking labor market. The United States had hoped for inflation to develop US' economy. However, in September, it seemed to move toward deflation. The speed of economy recovery had become slower.In order to regenerate EU economy's momentum, European Central Bank (ECB) had proactively implemented a large scale of QE policy since March this year.Nonetheless, the latest data showed that September's inflation rate was -0.1%, far below the target 2%.The negative value of inflation rate had increased pressure on Europe's governments to repay debts, and had made some people spend less.Surprisingly, Eurozone had not been affected by the downturn of China economy and large developing economies. Markit predicted that in October, composite PMI in October's initial value would be 54, which would bring positive momentum for Eurozone's economy recovery. With existing risk of deflation, ECB will surely either extend the QE policy or enter into another round of quantitative easing (QE 2.0) to increase inflation rate.


China's general prices were lowering. In order to resist deflation, People's Bank of China (PBC) announced to implement policies of lowering the deposit reserve rates and lowering the interest rate on October 23rd.One-year loan interest rate and the benchmark deposit rate were adjusted downwards to 4.35% and 1.5% respectively. Financial institutions' Renminbi (RMB) deposit reserve rate was modified downwards by 0.5%.Policies of lowering the deposit reserve rates and lowering the interest rate have been China's traditional regular currency policies. They are not identical with QE policy, so there is still room for QE to be implemented. China's National Bureau of Statistics announced its latest PMI data. In October, the manufacturing PMI stayed flat at 49.8%, the same as in September.This meant that manufacturing and the demand of market had maintained balanced. The manufacturing industry had showed possible signs of recovery. Currently, China economy has been stably developing.Japan's export growth rate in September had only been 0.6%, lower than the market-expected 3.4% and lower than what was in August. This proved that Japan economy had been weak.Export growth rate has been one of the major indicators of GDP.If Japan's Q3 GDP data continue the trend of shrinking since Q2, this is negative growth for two consecutive months, which casts deeper doubt whether Japan economy is in recession or not.
In 4Q15, panel makers' investor reports for Q3 have been delivered. According to financial reports' data of LG Display, BOE, AUO, and Innolux, these panel makers' profits had been decreased in 3Q15.Even though BOE's sales revenue had grown QoQ, its net profit declined 94.9% YoY because of RMB depreciation and increase of operating expense.The sales revenues of Taiwanese top two panel makers AUO and Innolux also decreased due to the weak demand of consumer products.According to WitsView October's panel price report, all the sizes of TV panel's prices were under shadow of falling. The mainstream size 32" TV panel's price fall was around $2~3.If panel makers have still not adjusted capacities, in November, 32" segment of TV panel price will approach $60. Due to increasing supply of 39.5" and 43" panels, their price drop enlarged to $7~8.The 55" and 65" segment panel price dropped more than $10 in October because the peak season stocking up had ended and large sized panel capacities had continued to increase. Large size panel price war had worsen. In 4Q15, the scale of TV panel price drop has expanded, and IT panel price drop has not been predictable. Hence, WitsView predicts that panel makers' profit will continue to decrease, and some panel makers might even lose money in one quarter.Currently, panel makers have not adjusted capacities in a larger scale.If the market trend remains unchanged, WitsView predicts that in 1Q16, most of panel makers will be hard to avoid losing money.Money-losing panel makers will eventually have no choice but to modify downwards capacity utilization rates in a larger scale.Even though the year 2015 has been a year of good profits for panel makers, these profits might pull panel makers through the difficulties in 1H16.

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