"LGD Target Price Downgrade" JP Morgan's Suspicious Intentions

JP Morgan Holds Large Short Selling Balance
LG Display Target Price Downgraded
Different from Domestic Securities Firms' Outlook

LG Display Paju Plant

[Asia Economy Reporter Hwang Junho] The US investment bank JP Morgan has lowered the target price for LG Display (LGD). Given that JP Morgan is one of the major holders of short-selling positions in LGD, the market is raising suspicions about the intent behind the downward revision of the target price.

According to the financial investment industry on the 16th, JP Morgan, the largest bank in the US, downgraded LGD's investment opinion to Neutral on the 15th and lowered the target price to 23,000 KRW. JP Morgan presented this opinion by applying a price-to-book ratio (PBR) of 0.52 times to the 2022 forecast, based on the outlook for a slowdown in LCD prices. In April, JP Morgan had issued an Over Weight rating with a target price of 34,000 KRW.

JP Morgan judged that LGD's stock price has not properly reflected the effects of rising LCD panel prices. While Taiwanese display manufacturers such as INX and AUO rose by 30-33%, LGD only increased by 23%. They also noted that the LCD price is entering a downward cycle, which could exert downward pressure on the stock price. Although the benefits from strong LCD prices are expected to continue until the third quarter of this year, from the fourth quarter onward, profits are expected to sequentially decline until the second quarter of next year due to demand normalization.

On the 11th, dealers were working in the dealing room of Hana Bank in Jung-gu, Seoul. On that day, the KOSPI opened at 3,226.98, up 2.34 points (0.07%) from the previous trading day. The won-dollar exchange rate started at 1,113.0 won, down 2.8 won from the previous trading day. Photo by Hyunmin Kim kimhyun81@

Following this outlook, foreign investor desks recorded net sales worth 39.6 billion KRW on the day. This volume is 6.3 times the net sales of 6.2 billion KRW recorded the previous day. Compared to the June average of 5.4 billion KRW, it is about 7.3 times higher. Foreign investors have recorded net selling on all trading days this month except for the 1st. Thanks to net buying of 51.8 billion KRW by individual investors, the stock price only fell by 1.94%.

On this day, the short-selling ratio of LGD's total trading reached 30.12% (27.5 billion KRW). In terms of trading value, it ranked second after HMM and had the highest trading ratio. Currently, LGD's short-selling balance amounts to 328.8 billion KRW, the highest level since short selling resumed on the 3rd of last month. Among all stocks, it is the second largest short-selling balance after Lotte Tour Development.

In the market, suspicions are raised because domestic securities firms' research centers are either raising or maintaining target prices, while JP Morgan lowered its target price, and JP Morgan is one of the major holders of LGD's short-selling balance. There are concerns that this might be a deliberate downward forecast.

Hwang Sewoon, a research fellow at the Capital Market Institute, said, "Deliberate downward revisions of target prices can be seen as unfair practices, but it is not easy to prove." He added, "Since foreign securities firms have a significant influence on foreign investors' investments, a downward outlook could lead to stock price declines or increased short-selling activity."