Hynix Shares Soar on WTO Ruling, Fed Rate Cut Hopes

Shares of South Korean memory chipmaker Hynix Semiconductor rose sharply on Thursday following news that the World Trade Organisation (WTO) had sided in its favor in a tariff dispute with Japan.

South Korea last year had asked the World Trade Organisation to arbitrate a dispute with Japan over tariffs on computer memory chips supplied by Hynix.

Shares in Hynix jumped 7.5 percent in the afternoon session.

"This is a very important decision as Hynix has won the final ruling," said Bang Min-ho, a spokesman for Hynix, the world's No.2 memory chipmaker. "Hynix now has the legal grounds to officially request that the Japanese government withdraw the tariff."

South Korea's foreign ministry said in a statement it would soon start negotiations with Japanese authorities to implement the report and would request the immediate withdrawal of the duties imposed on Hynix's DRAM products.

Japanese authorities will comply with the ruling and most likely lower the duty, Masashi Nakazono, a director at Japan's trade ministry, told Reuters. "Is this the result we were hoping for? No. But some of our points have been upheld," Nakazono said. "The ruling cited problems in the calculation of the fees. It does not necessarily mean the elimination of the tariff."

Analysts downplayed the direct impact of the WTO decision on stocks. "The WTO ruling in itself is not a real factor," said Lee Min-hee, an analyst at Dongbu Securities. "Today's rise has more to do with hopes of another U.S. Federal Reserve rate cut and strength in the U.S. tech sector."

Hynix and other chip makers are starting to be very attractive price wise, which may better explain the rise, said Park Hyun, an analyst at Prudential Investments and Securities.

"The WTO decision is having an impact, but it's one of many factors at work," he said.

A Samsung Electronics executive on Wednesday said that the company would not invest more in 2008 than in 2007, lessening pressure on fellow chipmakers by raising the possibility of a supply drop next year.

Samsung, the world's top maker of memory chips, was up 4 percent, along with Japanese DRAM maker Elpida, up 6.6 percent.

Japan in January 2006 slapped a 27.2 percent duty on dynamic random access memory (DRAM) chip imports from Hynix after Japanese rivals alleged the South Korean chipmaker received government subsidies via low-interest loans and creditor bail-outs.

Japan's decision followed similar punitive duties by the United States and the European Union imposed against Hynix. Review processes are still ongoing in both cases, Hynix said. South Korea's foreign ministry said the WTO ruling could have a favorable impact on both review processes.