Margin fears pull down Foxconn shares 24pc

Shares in Foxconn International Holdings, the world's biggest contract maker of mobile telephones, plunged 24.06 per cent yesterday, cutting the company's market value by HK$13.6 billion as investors grew concerned about its shrinking margins.

The stock dived HK$1.85 to close at a three-year low of HK$5.84. That compared with its highest close of HK$27.55 on November 3, 2006.

The retreat, which cut the firm's market capitalisation to HK$41.23 billion from HK$54.8 billion, extended the stock's drop this year to 66.63 per cent, making it the worst-performing member of the benchmark Hang Seng Index.

'The handset industry became very competitive in the first half due to rising labour and raw material costs,' said BNP Paribas analyst Frederick Wong.

'Apple has recently cut the selling price of its iPhone, followed by Nokia, which also joined the price war in the smartphone market. That has resulted in a harsh environment for contract manufacturers.'

The Shenzhen-based company, a supplier to customers including Nokia and Motorola, said last Friday its first-half profit was expected to decline significantly because of the change in product mix, rising operational costs, increased long-term investment in research and development and production facilities, as well as high income tax expenses.

The handset maker, a unit of Taiwan's Hon Hai Precision Industry, reported a profit of US$324 million for the first half of last year.