Shares in LG.Philips LCD Co Ltd surged on Friday on market talk Japan's Matsushita Electric Industrial was buying a stake in the South Korean flat screen maker, but both firms poured cold water on the talk.

There is market talk that Matsushita will buy a stake in LG.Philips, said Jay Kim, an analyst at Hyundai Securities. Other traders also said they were aware of the speculation.

An LG.Philips spokeswoman said the company was seeking strategic partnerships with other companies. But we are not currently in talks with any specific company, she said.

Matsushita said separately that it was not negotiating or considering negotiating with LG.Philips LCD on a stake.

LG.Philips, the world's second-largest maker of large-size flat screens, told Reuters in an interview on Wednesday it is in talks with major television makers about taking a stake in the South Korean firm and does not rule out Japanese companies.

LG.Philips is searching for a strategic buyer in the wake of Philips Electronics' $2.2 billion stake sale earlier this month, which cut the Dutch company's holding in the flat screen joint venture with LG Electronics Inc to 19.9 percent from 33 percent.

Shares in LG.Philips were up 5.7 percent at 45,350 won as of 0539 GMT, after earlier jumping as much as 11.89 percent to a two-year high.

In a broad tech sector rally in South Korea, Hynix Semiconductor Inc, the world's second-biggest memory chip maker, also soared 12.8 percent to 26,000 won and bigger rival Samsung Electronics Co Ltd jumped 3.16 percent to 523,000 won.

Analysts said they maintained a grim outlook for memory chip makers as chip prices continued to sag with no signs of imminent improvement, but added that investors may be considering the stocks' recent slump as overdone.

Hynix shares had fallen 26 percent this month alone by Thursday's close.

A number of investors must have decided that Hynix shares hit a bottom yesterday, and probably decided to buy today, said M.S. Song, and analyst at CJ investment Securities.

Others agreed that Hynix shares had recently been oversold and said institutions were aggressively rebuilding positions in preference to investments in China.

Trading volume in Hynix totaled 13 million, the biggest in nearly 4 months.

It may be the case of some investors deciding things cannot get worse for Hynix, said Hyundai's Kim.

(Additional reporting by Mayumi Negishi in Tokyo and Kim Yeon-hee in Seoul)