LG Electronics, Samsung Fall on Nokia Price Cut Talk

Shares in LG Electronics tumbled more than 8 percent on market talk that top mobile phone maker Nokia may cut its handset prices and re-enter South Korea in the second half of this year.

Shares in No.4 handset maker LG were down almost 8 percent in the morning session. Shares of bigger home rival Samsung Electronics, the world's No. 2 maker, were down almost 4 percent, underperforming a 1.7 percent fall in the wider market.

"Rumors have been circulating that Nokia will cut its prices on handsets by as much as 20 percent, in an attempt to steal more market share from laggards like Motorola," said Kim Ik-sang, an analyst at CJ Investment & Securities.

Several analysts also mentioned talk that Nokia may re-enter the Korean market this year after withdrawing in 2003 due to poor results.

But they said investors were probably overreacting to the news since Nokia and LG occupy different segments in the mobile phone market. 

"Nokia focuses on low-end cell phones, while LG concentrates on high-end ones. So even if Nokia decides to trim its prices, the impact on LG's handsets will be limited," said Kevin Lee, an analyst at Woori Investment and Securities.

"I think the market is overreacting here and I'm mindful that the share has gained a lot lately," said Greg Roh of Korea Investment & Securities. 

LG Electronics shares had jumped 46 percent so far this year as of Friday's close, while Samsung shares had climbed 27 percent as of Friday.

© 2008 CNBC.com