Taipei, Shares of Hon Hai Precision Industry Co., the world's largest contract electronics maker, plummeted more than 7 percent Friday, when trading in the stock resumed after a week-long break for the company to complete a capital reduction, dealers said.
The selling in Hon Hai was partly to compensate for the 4.6 percent fall in the Taiwan Stock Exchange's weighted index, the Taiex, and the 5.7 percent fall in the market's electronics sub-index while trading in Hon Hai was halted from Oct. 18 to 25.
Hon Hai tumbled 7.75 percent to close at NT$76.20 (US$2.46), with 93.59 million shares changing hands, underperforming the Taiex, which ended down 0.33 percent at 9,489.18.
The stock came under heavy pressure when the market opened, falling 3.4 percent from its reference opening price of NT$82.60.
That weakness continued to the end of the session as investors reacted to the broader market's general doldrums.
"Today's selling in Hon Hai shares simply followed the downturn of the market and other market heavyweights in the previous sessions," MasterLink Securities analyst Tom Tang said.
Among the market heavyweights Tang was referring to was contract chipmaker Taiwan Semiconductor Manufacturing Co., the most heavily weighted stock in the local market, which plunged 7.97 percent during the week-long period.
"Market sentiment toward the financial market has been haunted by lingering concerns over trade friction between the United States and China," Tang said.
"Hon Hai, which has a big production base in China, could feel the pinch from such unfavorable global trade circumstances."
Tang said the stock has become technically fragile after Friday's plunge.
"There are no signs of where Hon Hai shares will find immediate and strong technical support unless foreign institutional investors resume buying," Tang said.
Foreign institutional investors were net sellers of Hon Hai shares for nine consecutive sessions through Oct. 17, the last trading day before the suspension, selling a net 127.54 million shares during that stretch.
Known as Foxconn internationally, Hon Hai announced in May a capital reduction plan to lower its paid-in capital by NT$34.66 billion, or about 20 percent, to NT$138.63 billion by returning NT$2 in cash to shareholders for every share they hold.
Hon Hai, which launched a capital reduction for the first time since it went public June 18, 1991, was using the move to improve its capital structure and boost returns for shareholders.
Last week, Financial Supervisory Commission Chairman Wellington Koo (???) said Hon Hai is now prohibited from launching any initiative to issue new shares to raise capital within a year of the capital reduction.
Source: Focus Taiwan News Channel