By Greg Gao
(JW Insights) Oct 24 -- Foxconn Industrial Internet, a Chinese mainland-listed company under the Hon Hai Group, plummeted to the limit of 10 percent daily variation imposed by the Shanghai Stock Exchange on October 23 as China’s tax and natural resource authorities launch last Friday investigations into Foxconn companies in several provinces.
By the close of trading of October 23, there were approximately 68.2 million sell orders, effectively locking the stock at its daily limit-down price of RMB14.55($2). As a result, the company's total market capitalization plummeted by RMB32.1 billion($4.4 billion) in a single day, shrinking to RMB289 billion($39.5 billion).
Regarding the sharp decline in Foxconn Industrial Internet's stock price, fund professionals explained that corporate investigations are a normal occurrence. However, the market exhibited significant negative sentiment, and investors were concerned about potential risks, which, in turn, caused the stock price to experience a substantial drop influenced by these emotions.
Chinese mainland tax authorities have conducted tax inspections on key enterprises of Foxconn in Guangdong and Jiangsu provinces on October 22. The Natural Resources department has also conducted on-site investigations into the land use of key enterprises of Foxconn in Henan and Hubei provinces, reported Global Times. Foxconn is a Taiwan-headquartered company known globally for making Apple products including iPhones.
Hon Hai Group, the parent company of Foxconn, issued an urgent statement on October 22, declaring, "Legal compliance everywhere we operate around the world is a fundamental principle of Hon Hai Technology Group (Foxconn). We will actively cooperate with the relevant units on the related work and operations."
Zhang Wensheng, deputy dean of the Taiwan Research Institute at Xiamen University, told the Global Times,” Conducting tax inspections and investigating land use situations of domestic enterprises in China are normal market supervision activities, which are reasonable and legal. Enterprises of Foxconn have the obligation to cooperate and jointly maintain market order, and should be ready to correct their mistakes if any violations are found.”
Zhang noted that China’s mainland has always welcomed Taiwan-funded enterprises to invest in the mainland and protected their legal interests. In recent years, relevant departments have provided preferential measures to Taiwan-funded enterprises, encouraging them to share the mainland's development opportunities. Enterprises from the island that have come to invest and establish factories in the mainland have indeed enjoyed the dividends of peaceful development.
As a flagship Taiwanese-funded enterprise, Foxconn has reaped substantial profits, expanded its presence on the mainland, and had its subsidiary, "Foxconn Industrial Internet," listed on the A-share board, contributing back to its parent company, Hon Hai Group.
