TAIPEI: The arrival of the mainland's top Taiwan negotiator lifted a number of shares yesterday that stand to benefit from liberalized economic ties with the mainland, including Taiwan's top flat-panel maker AU Optronics (AUO), which rose to a five-month high.

The arrival of Chen Yunlin, president of the Association for Relations Across the Taiwan Straits (ARATS), in Taiwan yesterday renewed speculation that Taiwan's flat panel makers would be allowed to invest in flat-panel production facilities on the mainland early next year.

Shih Yen-shiang, chief of the Executive Yuan, said after the stock market closed yesterday that the government is inclined to allow Taiwan flat panel makers to set up plants on the mainland, but did not give specifics such as when a decision to that effect will be made, the Central News Agency reported.

With AUO likely to be the main beneficiary of the new policy, investors sent its shares higher in early trading by the maximum 7 percent limit to a five-month intraday high of NT$38.4. The stock retreated slightly later in the session to close at NT$37.95, up NT$2.05, or 5.7 percent.

It was the most heavily traded stock on the Taiwan stock exchange yesterday, with 141 million shares changing hands.

Chi Mei Optoelectronics, Taiwan's No 2 LCD maker, rose by NT$0.3, or 1.4 percent, to close at NT$21.25.

The rise of flat panel makers' shares pushed the optoelectronics sub-index higher by 1.8 percent, beating the broader market. The Taiex, the market's key barometer, edged up 33.64 points, or 0.4 percent, to close at 7,787.27.

The speculation was set off after the Commercial Times reported yesterday that AUO may be allowed to set up a 7.5 generation plant in eastern China's Jiangsu province, representing an investment of over NT$80 billion.

The report said Taiwan's economic affairs authorities have noted that allowing Taiwan's flat panel industry to invest on the mainland is a higher priority than allowing the semiconductor industry to do so.

The arrival of Chen, who visited AUO's headquarters in the Hsinchu Science Park when he was in Taiwan last year, also increased the possibility of AUO setting up a flat panel facility on the mainland, the paper said.

AUO and Chi Mei both have assembly plants on the mainland, but have been barred from producing flat panels there to date. They are concerned about losing market share to foreign competitors that plan to set up advanced panel plants in the fastest-growing and potentially largest consumer market in the world.

Meanwhile, Taiwan Glass was also a star performer on the day, as the market speculated that mainland industry executives who came with Chen would visit the glass producer yesterday.

Taiwan Glass shares rose by the maximum 7 percent, or NT$1.70, to close at NT$26.45, on volume of around 10 million shares - its highest in the past three months.

Glass shares rose the most of any product index, gaining 5.25 percent. Machinery and electronics shares advanced 1.5 percent.

According to SinoPac Securities, Taiwan shares are expected to move higher in the first half of 2010 as economic growth reaches a peak in Q1 and a proposed economic cooperation framework agreement (ECFA) is signed around mid-2010.

This week's talks between Chen and Straits Exchange Foundation Chairman Chiang Pin-kung are expected to boost mainland-concept and ECFA-related shares in the near term, SinoPac said.

China Daily/CNA

(HK Edition 12/22/2009 page2)