Shares of Foxconn International Holdings Limited (HKG:2038), a subsidiary of Foxconn, jumped more than 30 percent in Hong Kong Monday, after the reports claimed that the unit may manufacture Apple Inc. (NASDAQ:AAPL)’s iPhones.
The rally in the shares was largely due to the expectation that like its parent Hon Hai, it will also become a part of Apple Inc. (NASDAQ:AAPL)’s supply chain. Till midday, Foxconn International Holdings Limited (HKG:2038) shares were up 34 percent at HK$3.67 under heavy volume, but off their intraday high of HK$3.69. Shares closed up 31.9 percent in their biggest ever single-day jump, adding $820 million to Foxconn International’s market value. Foxconn shares are still down nearly 28 percent this year.
Historically, the Chinese market has been relatively isolated from international investors, but much is changing there now, making China virtually impossible for the diversified investor to ignore. Earlier this year, CNBC pointed to signs that Chinese regulators may start easing up on their scrutiny of companies after months of clamping down on tech firms. That Read More
On Friday, Citigroup revealed in a report that Foxconn International started manufacturing metal casings for the iPhone 5, and the parent company may shift some of its iPhone assembly work to the subsidiary later this year. The report from Citigroup revised its rating for the stock to ‘Buy’ from ‘Neutral’, and also raised the target price to HK$5.80 from HK$4.00, citing iPhone business will help raise the company’s factory utilization rate to 80%, compared to 30%-50% in the past few years.
Like Citi, Nomura also claimed in a report that Hon Hai may shift a part of its iPhone component production to Foxconn International. “Foxconn International has some idle capacity and such an order transfer makes good sense. But assembling (the) iPhone needs a lot of fine-tuning of Foxconn International’s facilities and quality control, and that’s not easy to be done,” the report said.
Foxconn International Holdings Limited (HKG:2038) is a part of Taiwan’s Hon Hai Precision Industry Co., which assembles many Apple products, such as iPhones and iPads. Foxconn, the popular name, for Hon Hai Precision Industry, owns a 70 percent stake in Foxconn International.
Foxconn International Holdings Limited (HKG:2038), which assembles smartphones mainly for Nokia Corporation (NYSE:NOK), is a small contributor to the revenues of its parent firm. Foxconn International’s revenue stood at $6.38 billion last year, compared with Hon Hai’s group revenue of $118 billion. The company’s production facilities are mostly located in the same complexes as Hon Hai’s across China.
In a statement released to Hong Kong Stock Exchange, the company informed that even its board members are unaware of the reason behind this sudden rally in the stock. The statement reads, “The board also confirms that there are no negotiations or agreements relating to intended acquisitions…”.