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Foxconn unit IPOs and shoots to top of Shanghai exchange

Massive jump at opening causes halt in Foxconn Industrial Internet trade

Chen Yongzheng, chairman of Foxconn Industrial Internet, speaks at a ceremony marking the company's Shanghai stock market debut on June 8.   © Reuters

TAIPEI -- Foxconn Industrial Internet, a unit of Hon Hai Precision Industry, jumped 44% in its Shanghai Stock Exchange debut on Friday, increasing in value to 390 billion yuan ($60.92 billion) on the Chinese A-shares market.

FII’s market value is now the highest of any company listed on the exchange, surpassing that of state-backed Hangzhou Hikvision Digital Technology, which is at 364.1 billion yuan. It also exceeds the value of FII's parent company, which is 1.5 trillion New Taiwan dollars ($48.46 billion) on the Taiwan Stock Exchange.

The IPO marked the biggest debut on the Chinese stock market since 2015.

Immediately after the opening bell at 9:30 am, FII surged to 19.83 yuan, a significant jump that caused its trade to be suspended.

“The listing [of FII] gives us a fund raising platform and offers the company a larger stage to perform,” FII Chairman Tim Chen said during the listing ceremony in Shanghai.

Hon Hai, better known as Foxconn Technology Group, decided to float 1.97 billion A-shares, or 10% of FII’s capital, on the Chinese stock market with the goal of raising 27.1 billion yuan. FII’s strategic investors include BaiduAlibaba Group HoldingTencent Holdings as well as a list of state-backed enterprises like Shanghai State Development & Investment, China Railway Investment and the China Structural Reform Fund.

“It was no surprise that FII would skyrocket to this level on its first day of trading in Shanghai,” said James Wei, an analyst at Yuanta Securities Investment Consulting. "The P/E ratio of 17.09 times is not particularly high in the A-shares market."

FII makes equipment for cloud-computing and networking as well as precision instruments and industrial robots. It counts Apple, Amazon, Cisco, Dell, HP, Huawei Technologies and Lenovo Group as its top customers.

The company's focus matches the Chinese government’s desire to turn the country into a manufacturing powerhouse for smart technologies and gadgets, market analysts say. 

Two analysts said FII will enjoy a “honeymoon” period on the Shanghai Stock Exchange for a while, thanks to its focus as well as to the confidence investors have in Foxconn Chairman Terry Gou.

The company plans to use proceeds from the IPO to research and develop cloud-computing platforms, networking equipment and fifth-generation, or 5G, connectivity technology.

Chen said the company has started collaborating with Hangzhou Hikvision Digital Technology, the world’s leading surveillance camera system provider, in a bid to assist small- to medium-size enterprises in upgrading to smart manufacturing, the Chinese-language newspaper Economic Daily reported.

FII's listing will play an important role in Foxconn’s corporate transformation. Foxconn is currently building two flat-panel plants, one in China’s Guangzhou Province, and the other in the U.S. state of Wisconsin.

Gou wants to further expand his business empire into other sectors. He has repeatedly expressed an interest in having Foxconn get into the semiconductor business. In addition, Japanese electronics maker Sharp, which Foxconn bought in 2016, recently announced a plan to purchase Toshiba’s personal computer business. The purchase price is estimated at 4 billion yen ($36 million).

The Foxconn group seems to be making all of these moves to reduce its reliance on Apple and to hedge against the slowing smartphone sales.

Meanwhile, Gou is attending the 30th anniversary of the company's first investment in China, in Shenzhen, on Friday. To mark the occasion, Foxconn is holding a three-day forum on industrial internet-infused technologies in the city.

Foxconn was one of the first foreign investors to take advantage of Shenzhen's status as a special economic zone.

“The success of the opening up of China to foreign investment is very much the success of Foxconn in China,” Gou said during the start of the forum on Wednesday.

With over 1 million employees, Foxconn is China’s largest private-sector employer. As of the end of last year, the total value of Foxconn’s net foreign exchange reserves in China over the past 30 years totaled $237.4 billion, representing 7.6% of the country’s total foreign exchange reserves.

The company also accounts for nearly 4% of China’s annual total export value, according to data provided by Foxconn.

FII parent company Hon Hai shed 3.18% to close at NT$88.3 in Taipei trading on Friday. 

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