* Shares fall 15 percent from offer price of 900 yen
* Follows weak Hitachi Maxwell debut, bodes ill for Seibu listing
* Foreign investors were wary of offer, falling screen prices (Adds closing share price, Japan Display CEO comments, Seibu listing)
By Reiji Murai and Takashi Umekawa
TOKYO, March 19 Japan Display Inc, the world's largest maker of smartphone screens, slid 15 percent on 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 interest.
Japan Display's $3.3 billion 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 displays for Apple Inc's iPhone 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.
The disappointing debut for Japan Display and another for battery maker Hitachi Maxell Ltd - which slid 14 percent on its first day of trade on Tuesday - bode ill for an offering next month by rail and property group Seibu Holdings worth an estimated $1.8 billion.
"Like the Japanese saying: 'What happens twice happens three times.' The market will likely be wary about Seibu's April listing," said Yozo Asai, market analyst at Naito Securities.
Tokyo market participants said while concerns about earnings potential were a factor, this week's dual disappointments 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. The benchmark Nikkei average is down 11 percent so far this year.
Foreigners account for around 70 percent of the market and their relative absence has made for thin trading conditions that exacerbate price moves.
Shares in Japan Display ended Wednesday trade at 763 yen, compared with the offering price of 900 yen. The benchmark Nikkei average rose 0.4 percent.
Weaker investor appetite for new issues has also hit other markets as the Ukraine crisis and the first default in China's bond market spur investors to re-assess risk assets.
Chinese micro-finance lender Hanhua Financial Holding Co and Sufonda Group Holdings Ltd both delayed IPOs this month due to weak demand. Australian childcare centre owner Stirling Early Education cancelled an offering on Monday after it failed to attract investors following a profit warning.
The weak Tokyo 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.
They also tarnish a comeback story at Japan Display, where the government led a successful restructuring effort after other high-stake attempts to help chipmakers flopped.
Analysts noted some concerns that the company may move too aggressively on capital investment, but added that investors could be drawn to the shares once the market's sour mood had passed.
"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 ($1.2 billion) 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, Toshiba Corp and Hitachi Ltd, competes with Japan's Sharp Corp and South Korea's LG Display Co Ltd.
Japan Display CEO Shuichi Otsuka was bullish on the outlook for sales of high-resolution LCD screens that are the company's specialty, predicting that their use would expand into mid-range smartphones as well as tablets.
The proceeds of the listing will be used to expand cutting-edge production facilities, although Otsuka struck a cautious note on spending, pledging to proceed only if demand warranted.
He said he had learned from memory chip maker Elpida, which fell into bankruptcy and was acquired last year by U.S. rival Micron Technology Inc, not to invest too aggressively.
"We won't do it if we can't definitely see that (capacity) is insufficient," Otsuka told a news conference after the end of share trade.
The company has forecast an operating profit of 30.4 billion yen ($300 million) for the financial year to March 31, triple the previous year's result. It has set a target of a 10 percent operating profit margin for the next business year, double its estimated margin for the current year. ($1 = 101.3650 Japanese Yen) (Additional reporting by Denny Thomas in Hong Kong, Daiki Iga and Dominic Lau in Tokyo; Writing by Edmund Klamann; Editing by Edwina Gibbs)