UPDATE 2-LG Display shares slide on Lehman downgrade

(Adds other analyst comments, details on capex plans)

By Marie-France Han

SEOUL, May 16 (Reuters) - Shares in South Korea's LG Display (034220.KS: Quote, Profile, Research, Stock Buzz) fell more than 8 percent after Lehman Brothers downgraded its rating on the liquid crystal display maker and several rivals, heightening worries about oversupply and slowing profits.

Lehman cut its ratings on the Asian display industry to neutral from positive in a note dated Thursday, saying profitability had likely peaked in the first quarter, with margins seen weakening in the subsequent two quarters.

Lehman cut its recommendation on LG Display, the world's No. 2 maker of liquid crystal display (LCD) panels, and Taiwanese rivals AU Optronics (2409.TW: Quote, Profile, Research, Stock Buzz) and Chi Mei Optoelectronics (3009.TW: Quote, Profile, Research, Stock Buzz) to equal-weight from overweight.

LG Display stock fell 8.3 percent to 46,400 won on Friday, against a 0.2 percent rise in the wider market . It was the second-most actively traded stock on the market.

LG Display's shares fell more than rivals in the sector as the downgrade, combined with worries about a stock overhang, raised doubts about the company's ability to weather an expected market oversupply in 2009.

Some investors were also taken aback by news that the company planned to spend less on new technology and equipment. As oversupplies in 2009 loom, it is essential that display makers keep investing in technology to make more profitable screens.

But some analysts thought the South Korean company has invested more than enough to keep it on top of the game, adding that curbing capacity could be good for the industry in the longer term.