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Stocks

Hon Hai's Sharp takeover drama makes waves in stock markets

HONG KONG -- Speculation surrounding the final stages of Hon Hai Precision Industry's  four-year pursuit of Sharp has made an impact on related stocks in Taiwan and Hong Kong, affecting both the Taiwanese manufacturer's units and potential rivals.

     Subsidiaries and affiliates of Hon Hai, also known as Foxconn, have been buoyed by the deal, which was first announced in late February and finalized Thursday. Taiwan-listed shares of liquid crystal display panel maker Innolux jumped 20.3% between Feb. 24 and Thursday on the idea that Foxconn could merge it with Sharp's LCD business.

     In Hong Kong, Foxconn unit FIH Mobile  -- a blue chip that was once a constituent of the benchmark Hang Seng Index -- was in the spotlight, soaring 25% during the same period. The company runs mobile phone parts production facilities in Shenzhen and elsewhere in mainland China. But if its business expands outside China in the future, it could benefit from the Sharp acquisition, said Rosa Lee at Grand Finance Group.

     Meanwhile, the deal will expose other companies to fiercer competition. Optical lens maker Largan Precision  sank 2.3% over the last five weeks on speculation that Foxconn would also take over Kantatsu, a Japanese peer in which Sharp holds a stake, putting Largan in more direct competition with the Taiwanese electronics manufacturer. Electronics maker Pegatron, which vies with Foxconn for business from Apple, has seen its shares slide 3.1%.

     Reports that Innolux rival AU Optronics  is planning a capital increase lifted its stock 7.9%. The LCD panel maker likely intends to use the proceeds to bolster its research and development capabilities to prepare for intensifying competition.

     "Because [the Sharp deal] is such a big acquisition, various companies around the world could be affected," said Tsui Moon Kwong, research analyst manager at Gary Cheng Securities. Investors will likely need to take a longer-term view of changes to the industry map.

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