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Market Trend

Quote Prices Haven't Stopped Falling, so Panel Makers' Pressures of Losing Money Have Dramatically Increased in 1Q16
Published Feb.16 2016, 06:07PM (GMT+8)

According to WitsView's latest statistics, Market Confidence Index (MCI) declined 238.6 points, from 4056.3 points to 3817.7points during the period from January 12th, 2015 to February 15 th, 2016. United States Department of Labor's announcement showed that in December the labor participation rate of the United States increased 1 point and reached 62.6 percentage points. Amid them, US non-farm payrolls rose 292 thousand people from November's increasing 211 thousand people. To distinguish these data by age groups, employed population between 25 years old and 54 years old totaled 96.976 million people. Moreover, one thing worth noting was that 55 years old and above employed population had set a record high since January 1948, which was 34.019 million people. According to recent published data, advanced-age workers have gradually gained their proportion in the employed population of US. On the contrary, employed population with age younger than 55 years old have decreased their total population. The aging labor force has set a time bomb in the seemingly improved US labor market. Russia's oil short term operation costs have been near $30. Oil price has already fell below 30 dollars, and there has been no signs of stop falling. Therefore, Russia has stepped into a deep swamp of recession. With plummeted oil price and sanction from the West because Russia's support to Ukraine's separatists since 2014, Russia's GDP in 2015 dropped 3.7% and its economy was hit hard. Russia's central bank only had 200 billion dollars in foreign exchange reserves, and its money has been burning rapidly. If Russia runs out of money, chaotic situations might take place immediately.

General administration of China customs announced the December trade data of China. Based on these data, China's importing and exporting trade both declined YoY. The sluggish demand of exporting market saw a 1.4% decline, and total exporting trade reached 224.2 billion dollars. As for importing, due to price fall of crude oil and other raw materials, importing trade dropped 7.6% and reached 164.1 billion dollars. The weak importing and exporting trade made the year 2015 of China's importing and exporting lump sum fall 8% YoY. This did not match Chinese government's 6% growth rate target. China's purchase management index (PMI) of January was affected by weak importing and exporting trade data and by the approaching Chinese New Year holidays, and it reached 49.4% and dipped 0.3 percentage points compared with a month earlier, lower than market's expectation, 49.6%. On October 30th, 2015, Bank of Japan (BoJ) postponed its 2% inflation goal accomplishment date from the first half of 2016 to the second half of 2016. Recently, BoJ postponed this time target again to the first half of 2017 due to the plummeting oil price. In order to ensure Japan's economy will reach BoJ's goal within the deadline, BoJ announced on January 29th that at the monetary policy meeting, attendees voted 5-4 to apply a negative interest rate policy. BoJ will apply a negative interest rate of minus 0.1 percent to current accounts' excessive deposit reserve that commercial banks have held at BoJ. This new interest rate was a drop from the earlier 0.1 percent, and this negative interest rate had been a first since 2010. BoJ expanded its implementation of quantitative and qualitative monetary easing (QQE) policy, so loan costs of any length of maturity that were borrowed from commercial banks will be push down. Meanwhile, BoJ also pushed people to release more capital to the market, so that economic outlook will be stimulated. Whether negative interest rate policy will assist Japan's economy to get rid of deflation and to form a virtuous economic cycle is still to be watched.
Because of worsening global economics and currencies depreciation, in recent investor conferences of major panel makers such as AUO, Innolux, LG Display and so on, apparently many panel makers' annual sales were all dropping in 2015 compared with their 2014's because panel's ASP fall made makers lose money, even though many panel makers' shipment grew. Taiwanese maker AUO's, S. Korean LGD's and Samsung's risks of losing money in 1Q16 have increased if the market's new capacities kept on growing, fixed cost continued to increase, and panel's ASP has not touched the rock bottom. In 1Q16, a traditional off season, some panel makers started their annual maintenance. However, this did not cut production. Because new capacities kept on adding up, glut issue will be getting worse. WitsView estimated that this year panel glut ratio will expand from last year's 0.9% to this year's 3.6%. The issue of excess capacities is projected to be eased when it will be the second half of 2017. Besides, Taiwanese panel maker Innolux's Southern Taiwan Science Park's Gen 5 and 6 fabs were affected by the earthquake early this February. WitsView will closely watch how the suffering of Innolux will influence the panel industry.

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