Japan Display tumbles, marks Tokyo's second feeble debut this week

Reuters

By Edmund Klamann and Takashi Umekawa

TOKYO (Reuters) - Japan Display Inc <6740.T>, the world's largest maker of smartphone screens, slid 17 percent in its first day of trade - the second downbeat debut this week for a Tokyo stock market that has seen a marked drop in foreign investor participation.

Japan Display's $3.3 billion (1.9 billion pounds) stock offering, the country's biggest so far this year, had already met with a lukewarm reception from foreign investors concerned about signs of falling screen prices.

The supplier of screens to Apple Inc ended up cutting the overseas portion of its offer to 37.5 percent from 45 percent. The offer also priced at the bottom of its marketed range.

Tokyo market participants said while concerns about earnings potential were a factor, the steep declines for Japan Display and battery maker Hitachi Maxell Ltd <6810.T>, which fell 14 percent in its debut, owed more to unfavourable market conditions.

Foreign investors, unhappy with the pace of deregulation and worried about the impact of a sales tax hike in Japan appear to have largely stepped away from Tokyo stocks, they said. That has made for thin trading conditions that exacerbate price moves.

Japan Display's shares, which lost as much as a fifth of their value at one point, were changing hands at 750 yen in afternoon trade, down from their offer price of 900 yen. The benchmark Nikkei average <.N225> was down 0.5 percent.

"After Hitachi Maxell's fall yesterday, sentiment grew that the same might happen with Japan Display and sell orders took the lead," said Nobuyuki Fujimoto, a senior analyst at SBI Securities.

The disappointing debuts contrast sharply with a strong year for listings in Japan last year, when 52 of 54 newly listed companies rose on their first day of trade.

The debut mars what has otherwise been rare comeback story for a government backed restructuring effort after other high-stake attempts to help chipmakers flopped.

Some market participants said that success could draw investors back in time.

"Competition is intense in the LCD business but their earnings outlook isn't bad," said Masayuki Otani, chief market analyst at Securities Japan.

"The overall tone of the market is poor, dragged down by investors cashing out, but people could come back in to buy when they report earnings."

The offering included 140 million new shares worth 126 billion yen issued to raise funds for cutting-edge facilities. Its biggest shareholder, the government-backed Innovation Network Corp of Japan, sold down its stake to 35.6 percent from 86.7 percent.

The company, formed two years ago from display units of Sony Corp <6758.T>, Toshiba Corp <6502.T> and Hitachi Ltd <6501.T>, competes with Japan's Sharp Corp <6753.T> and South Korea's LG Display Co Ltd <034220.KS>.

Japan Display is planning to expand production as demand for smartphones continues growing - if at a slower pace - and the company remains bullish on prospects for the high-resolution screens that are its specialty.

In an interview last September, Chief Executive Shuichi Otsuka said the company was considering building a new facility, with a recently opened plant due to reach full capacity by summer of this year.

The company has forecast an operating profit of 30.4 billion yen for the financial year to the end of this month, triple the previous year's result.

(Additional reporting by Daiki Iga, Dominic Lau, Ayai Tomisawa and Reiji Murai; Editing by Edwina Gibbs)

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