Market Trend

Based on WitsView’s latest data, MCI declined 54.5 points from 5456.8 points to 5402.3 points from Jan. 7 to Feb. 10 2015. The market starts to debate on when and if the Fed will announce the interest hike after FOMC’s monetary policy market held at the end of January. According to the meeting statement, the interest rate hike will presumably be announced in the second half of the year. Nevertheless, the market doubts the officials’ optimism would lead to premature interest rate hike as the declining crude price drags down inflation, and interest rate increase would pressure the economic growth and result in deflation. However, the Fed expects the drop in crude price to be short-lived and inflation to recover to 2%. The U.S. upcoming economic policies will be determined by the nation’s economic steadiness and uncertainties in international environment. The long-waited European QE was finally announced on Jan. 22 and will start in March, as ECB is expected to purchase 1.14 trillion euro of debts through Sept. 2016. The Central Bank President Mario Draghi has no option but implement QE when facing deflation, low benchmark interest rate, and weak economic growth. Meanwhile, Greece’s leftwing anti-austerity alliance wins the parliamentary election but encounters ECB’s hard stand on Greece’s debts. Unless Greece accepts the new bailout terms, the member state’s exit will be realized.  

China’s Statistics Bureau on Feb. 2 published the manufacturing and non-manufacturing PMI readings, coming to 49.8 and 53.7 respectively for January. The former reached a 28-month low and dropped below the benchmark 50, while the later was the lowest for the past year. With the declining economic growth as new normal, China would inevitably take more stimulus measures. As a result, PBOC cut the reserve requirement ratio by 0.5% without warning on Feb. 4, the first reduction in three years. The capital flow would possibly pump into the overheating industries and lead to more asset bubbles, and with the actual unemployment rate higher than official number, the challenges between tightening and loosening policies remain. The recent yen depreciation encourages Japanese companies to produce domestically, and as the export products get cheaper, large enterprises enjoy approximately 14% growth in profits averagely. However, the declining crude price lowers the country’s inflation and causes deflation risks. BOJ’s easing policies are severely tested. The global economic growth is solely relied on the U.S., and while remaining economies loosen policies, it is worth noting if the weak global economy drags down the U.S. recovery.    

With the Lunar New Year coming, panel makers AUO, LG Display, and SDC have concluded the financial results for 2014, which show ideal profits and a rarely-seen fruitful year for the panel industry. The atmosphere supports an optimistic attitude on 2015, and the production reduction is not carried out in the slow season. Based on WitsView’s analysis, panel industry’s overall utilization declines only 4% in Q1 and the supply pressure remains elevated. At the demand side, the monitor panels cannot get rid of the oversupply risks due the weak demand and lack of buzz. The NB panels suffer from slow demand as NB sales is impacted by the currency depreciation in Russia and Brazil. The TV panel demand, mildly stronger than IT panels, is influenced by the slow season as the demand for 4K and ultra-sized TV softens. Based on WitsView’s latest panel price research, the IT panel price declines constantly US$0.3-0.5, and the 55”-and-above TV panel price has US$3-10 price drop. China’s weakening domestic demand and sluggish economic growth in major and emerging economies would seed uncertainties to the 2015 panel industry. After mid-Q1, the newly-added capacity risks emerges in Q2, and with the oversupply pressure escalating, the industry will face a new wave of challenges.