Hon Hai shares dip to 7-year low

Taipei, Shares of Taiwan-based Hon Hai Precision Industry Co., a supplier to Apple Inc., have come under heavy downward pressure, falling to a new low in more than seven years amid worries over its shipments at a time of weaker-than-expected demand for the latest iPhones, dealers said Monday.

Hon Hai shares moved sharply lower by more than 2 percent in the wake of a tumble on the broader market, which felt the pinch of a plunge on Wall Street at the end of last week caused by fears over an economic slowdown and trade tension between the United States and China, the dealers said.

Shares of Hon Hai shed 2.03 percent to close at NT$67.70 (US$2.19), slightly off an early low of NT$67.60, with 33.77 million shares changing hands on the Taiwan Stock Exchange Monday, when the weighted index ended down 113.34 points, or 1.16 percent, at 9,647.54.

Hon Hai's closing price was the lowest since Oct. 5, 2011, when the stock ended at NT$67.60.

The stock was faced with heavy selling soon after the local equity market opened and downward pressure continued to push its share price even lower until the end of the session. Due to the losses, Hon Hai's market capitalization fell to NT$938.3 billion Monday from Friday's NT$957.7 billion.

According to a market estimate, Hon Hai took all of the orders placed by Apple to assemble the iPhone XS, more than 80 percent of the orders for the iPhone XS Max, and less than 50 percent of the orders for the iPhone XR.

"Several other Apple suppliers here reported poor sales results for November despite the debut of the new iPhones (in September) and such pessimism toward iPhone sales spread to Hon Hai today," Xincheng International Investment Consultant analyst Chang Chih-cheng said.

Among other heavyweight Apple suppliers, Largan Precision Co., a smartphone camera lens maker, reported last week that its November consolidated sales fell 23.1 percent from a month earlier to NT$40.07 billion. Largan's November sales also dropped 28.57 percent from a year earlier, and the company said sales for December could continue to fall.

Hon Hai has not released its November sales yet, Chang said, so the market tended to hold a cautious attitude by dumping the stock throughout Monday's session.

Due to the slower-than-expected sales of the new iPhones, the market has anticipated that Hon Hai's gross margin could be depressed over the next few quarters, the dealers said.

In the third quarter, Hon Hai's gross margin was 5.87 percent, up 0.24 percentage points from a quarter earlier, its operating margin rose by 0.81 percentage points to 2.28 percent, and net margin also rose to 1.81 percent from 1.62 percent.

"Whether Hon Hai shares will bounce back from the seven-year low will depend on whether foreign institutional investors will shift to the buy side for the stock," Chang said.

Foreign institutional investors sold a net 57.94 million Hon Hai shares in the previous trading sessions after a net sell of 16.47 million shares Friday.

Source: Focus Taiwan News Channels