November 17, 2008 / 7:48 AM / 11 years ago

Asia tech shares fall after Nokia warning

SEOUL (Reuters) - Shares in top South Korean tech names fell on Monday as investors responded to Friday’s warning by top handset maker Nokia Oyj NOK1V.HE about weakness in the world’s mobile phone market next year.

A woman uses her mobile phone as she walks next to an outsized Nokia mobile phone advertisment in Berlin October 16, 2008. REUTERS/Fabrizio Bensch

Shares in Samsung Electronics (005930.KS), which trails Nokia in the handset market, fell 3.12 percent to 450,500 won and world No. 5 LG Electronics Inc (066570.KS) lost 4.76 percent to 76,000 won after falling as much as 7.5 percent, underperforming the wider market's .KS11 0.91 percent fall.

The Nokia waves were felt in Taiwan where smartphone maker HTC Corp (2498.TW) fell by 5.82 percent, underperforming the benchmark TAIEX share index .TWII, which dropped 0.29 percent.

Taiwanese cellphone component makers fell, with shares in Largan Precision (3008.TW), which makes the lenses used in many camera-enabled cellphones, and Unimicron (3037.TW), which makes printed circuit boards, both down by their daily 7 percent limit.

“A slowdown in demand in the technology sector had been expected, but it really hit home when Nokia, whose forecasts are very accurate, issued its warning,” said Chung Sung-ho, an analyst at KB Investment & Securities.

Handset makers had remained relatively unscathed by the global economic crisis this year, but analysts said Nokia’s warning, following those by Qualcomm (QCOM.O) and Intel (INTC.O), underscored a rapid weakening of consumer electronics demand.

Nokia forecast 1.24 billion phones would be sold worldwide this year, down from a previous estimate of 1.26 billion, and said handset market volumes and the overall telecommunications equipment market was expected to fall next year.

It now expects fourth-quarter industry volumes to be around 330 million mobile devices, down from a year ago, and well below the 346 million average forecast in a Reuters poll earlier this month.

“The impact of the economic downturn is becoming overwhelming and the tech sector’s fourth-quarter earnings are likely to come weaker than expected,” said Steve Lee, an analyst at Goodmorning Shinhan Securities .

“Companies are cutting prices for handsets and other products to maintain revenue and meet annual targets. For LG Electronics, foreign investors have recently been selling out of the stock.”

Lee said LG’s earnings outlook remained poor until at least the first quarter of next year.

Taiwanese electronics giant Hon Hai (2317.TW), however, rose as investors focused on a statement released on Friday where it said it had billions of dollars on its books. Hon Hai is the contract manufacturer for many of Nokias cellphones.

“Companies which have very high exposure to Nokia are very clearly affected today. This is similar to Intel’s revenue warning last week, which impacted shares of PC companies, so coupled with the downward pressure that still exists, we could see shares being affected for a few more days,” said Kevin Chang, head of regional tech strategy at Yuanta Securities.

Still, the extent of the Korean companies’ fall may not have been completely warranted, some analysts said.

“Samsung and LG have a very different product mix” from Nokia, said Park Hyun, an analyst at Prudential Investment and Securities.

“The weakness of the won gives them an advantage they can use to expand their market share. We can expect South Korean companies to be less affected by the downturn.”

(Additional reporting by Rhee So-eui in SEOUL and Kelvin Soh in TAIPEI)

Reporting by Marie-France Han, editing by Keiron Henderson

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