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Hon Hai shares soar on China approval of unit's IPO

2018/03/09 13:33:17

Taipei, March 9 (CNA) Shares of Taiwan-based manufacturing giant Hon Hai Precision Industry Co. surged Friday after its Internet-focused subsidiary secured approval from Chinese authorities a day earlier to launch an initial public offering in Shanghai, dealers said.

The buying also reflected strong bargain hunting as Hon Hai shares had been in consolidation mode on the local main board for some time, and expectations that it will benefit from the fund raising for its subsidiary's IPO, they said.

As of 12:08 a.m., shares of Hon Hai had climbed 2.68 percent to NT$91.80 (US$3.13), with 69.89 million shares changing hands on the Taiwan Stock Exchange, while the weighted index was up 0.38 percent at 10,864.90 points.

Hon Hai attracted strong buying soon after the local equity market, propelling the stock past its 60-day moving average of NT$92.20 at one point, dealers said.

They said investors were encouraged to pick up Hon Hai shares after the China Securities Regulatory Commission (CSRC) gave approval for Foxconn Industrial Internet Co. Ltd. (FII) to raise 27 billion Chinese yuan (US$4.3 billion) from an IPO on the Shanghai stock exchange.

"The average price to earnings ratios of stocks listed in Shanghai is about 100 percent higher than shares traded in Taipei on average," Mega International Investment Services Corp. analyst Alex Huang said. "The IPO will benefit not only FII but also its parent company, which will receive fat proceeds from the listing."

After the IPO, Hon Hai is expected to retain an 85 percent stake in FII. The FII application for the IPO was submitted on Feb. 1 to the CSRC, which reviewed it on Thursday and immediately gave approval, catching the market off guard as the processing of such applications in China usually takes about a year.

According to Chinese media, the listing is expected at end of March.

The CSRC's fast approval of the FII's IPO proposal was an indication of China's plan to lure high-tech firms as it prepares to develop its technology and innovation sector, dealers said.

Meanwhile, Hon Hai said the listing in Shanghai will allow FII to take tap into the rapid growth of the internet communications and cloud-based computing businesses in China, and that the proceeds from IPO will be invested in the expansion of its internet business there.

FII's investment in China will focus on a wide range of new technologies, such as cloud-based computing, high performance computing, 5G Internet communications solutions for industry use, data centers and smartphone-related applications, Hon Hai said.

Lawmakers in Taiwan, however, have expressed concern that other Taiwanese companies would be lured by the CSRC's speedy approval the FII application to list in China.

Ker Chien-ming (柯建銘), ruling Democratic Progressive Party legislative caucus whip, told the press that the Taiwan government should take steps to retain enterprises.

Sounding a similar note, opposition Kuomintang lawmaker Tseng Ming-chung (曾銘宗), said Taiwan's economy would suffer as a result of a brain drain if an increasing number of Taiwanese firms followed in Hon Hai's footsteps.

(By Chung Jung-feng, Liu Kuan-ting and Frances Huang)