Taipei, May 3 (CNA) Shares of Hon Hai Precision Industry Co., the world's largest contract electronics maker, staged a technical rebound Thursday morning after recent sell-offs, as impact from its disappointing first quarter results faded to some extent, dealers said.
However, whether and how the stock will recoup its recent massive losses will depend on trading strategies by foreign institutional investors, who have become cautious about Hon Hai's earnings outlook, the dealers said.
As of 11: 25 a.m., shares of Hon Hai had added 0.56 percent to NT$90.10 (US$3.08) with 59.35 million shares changing hands, while the benchmark weighted index was down 0.20 percent at 7,661.49 points.
After Hon Hai released its unconsolidated earnings April 28, its share price fell almost 10 percent in the following two trading sessions. The local market was closed for the Labor Day holiday Tuesday.
In the Wednesday session, Hon Hai shares recovered some of their early losses at the end of the session, as many retail investors appeared more willing to pick up bargains after the stock fell below the NT$90 mark.
Trading of Hon Hai shares accounted for more than 20 percent of the local bourse's total turnover Wednesday, when foreign institutional investors stayed on the "sell" side.
"It is time for the stock to take a breather, technically," MasterLink Securities analyst Tom Tang said. "After the recent steep decline, it seems that Hon Hai shares have found some short-term support."
"But, how far the rebound will go is up to foreign institutional investors' attitudes after they cut their target prices on the stock following the first quarter results," Tang said, adding that foreign investors still hold a big chunk of Hon Hai shares.
As of Wednesday, foreign institutional investors held 51.5 percent of Hon Hai's outstanding shares, according to the Taiwan Stock Exchange.
For the first quarter, Hon Hai posted NT$1.40 in unconsolidated earnings per share, sharply lower than the NT$3.18 recorded in the fourth quarter of last year.
The first quarter results disappointed the market, which had expected the EPS to range between NT$1.8 and NT$2.5, Tang said.
"I suspect the lower-than-expected first quarter earnings largely resulted from rising labor costs in China that squeezed the company's bottom line, although it recorded significant sales during the same period," he said.
Despite the current mild rebound, Tang advised investors to keep a close eye on Hon Hai's profitability.
(By Frances Huang)