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Foreign brokerages mixed on Hon Hai after Gou's presidential bid

2019/04/20 19:41:07

Taipei, April 20 (CNA) Foreign brokerages had different views of how the 2020 presidential bid of Hon Hai Precision Industry Co. Chairman Terry Gou will affect the company's operations.

In a research note, an Asian brokerage said Hon Hai, the world's largest contract electronics maker, has more than 15 business groups run by their own executives, so Gou's absence from day-to-day operations to run his campaign will have little effect on the company.

The Asian securities house maintained its "buy" recommendation on Hon Hai shares and left its target price of NT$110 (US$3.57) for the stock unchanged.

On Friday, shares of Hon Hai, an iPhone assembler, fell 2.95 percent to close at NT$88.90, off a high of NT$92.90 on the Taiwan Stock Exchange (TWSE), as investors decided to cash in on the stock's recent gains.

Despite the fall in Hon Hai's share price on Friday, foreign institutional investors bought a net 3.60 million shares of Hon Hai during the session, marking the 17th consecutive trading session in which they were net buyers of the stock, according to the TWSE.

The Asian securities house echoed Hon Hai's statement released on Thursday, which said that all of the subsidiaries under the company's corporate umbrella operate independently and every unit is run by a professional manager, indicating that Gou's shift into politics will not affect the day-to-day operations of these units.

The brokerage said Hon Hai shares had been consolidating for some time amid concerns over weakening global demand for iPhones, but those negative factors had been pretty much factored into its share price.

Hon Hai's subsidiaries, in particular Hong Kong-listed FIH Mobile Ltd., are also expected to cut their losses in the future, which would strengthen the parent company's bottom line, the securities house said.

A U.S.-based brokerage argued, however, that Hon Hai could suffer without a strong leader, and the giant business group could plunge into a driverless mode because of doubts about Hon Hai's ability to execute its policy in the post-Gou era.

The brokerage said a fall in iPhone sales and escalating competition also remained concerns to Hon Hai.

The securities house downgraded its rating for Hon Hai to "underweight" from "neutral" and cut its target price to NT$83 from NT$84.

CNA cannot identify the brokerages because media outlets in Taiwan are not allowed to report the names of foreign brokerages when they give price-moving forecasts for specific stocks or the wider market.

(By Jeffrey Wu and Frances Huang)
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