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Asian Flat-Panel Makers Surge on Earnings Hopes

Shares in Asian flat-panel makers, including LG.Philips LCD, surged on Monday ahead of what are expected to be solid quarterly earnings results as rising computer panel prices lift the outlook for the sector.

LG.Philips LCD led gains in the region ahead of its results due out on Tuesday and after UBS maintained its positive view of the sector, lifting the South Korean firm's 2007 and 2008 earnings forecasts due to rising IT panel prices.

Other Asian manufacturers such as Taiwan's AU Optronics could also see solid earnings through 2008 due to booming demand for panels and as the sector keeps its investments in check in a bid to avoid the oversupply that eroded earnings last year.

"All panel makers are benefiting from rising IT panel prices," said Jeff Kim, an analyst at Hyundai Securities. "The market is recognising that LG.Philips LCD will enjoy a long-term growth in earnings."

Shares in LG.Philips LCD surged 7.3%, trading at near its highest since mid-August, compared with the main KOSPI's 1% gain.

In Taiwan, AU Optronics rose by the daily limit of 7%, its highest since April 2004, compared with the TAIEX's 1.2% advance, while Chi Mei Optoelectronics surged 5.8%.

Many analysts expect LG.Philips LCD, a joint venture between LG Electronics and Philips, to post on Tuesday its best quarterly result since the second quarter of 2004.

UBS raised its 2007 and 2008 earnings-per-share forecasts for LG.Philips LCD by 9.4% and 46% respectively, citing rising IT panel prices, while raising its share target price on the stock to 52,500 won from 47,000 won.

The investment bank noted that IT panel prices have risen for seven consecutive months, the longest streak since a 15-month rise in 2003 and 2004.

"Continued strong demand and slower-than-expected supply are likely to keep IT panel supply tight through year-end," said UBS analyst Christian Dinwoodie in a report dated Oct. 5, adding the tight supply would continue through the first half of 2008, despite the typical slowdown in seasonal demand.