HONG KONG: Trading in shares of Foxconn International, the listed arm of the suicide-plagued Foxconn, resumed on Tuesday in Hong Kong and opened at HK$5.5($70.5), down 2.83 percent from the previous closing, in the wake of salary hike announcement.
By midday, Foxconn International finished at HK$5.38, down 4.95 percent after plunging as much as 8.66 percent in the morning session.
In a statement filed to the Hong Kong stock exchange on late Monday, Foxconn, the world's top contract cellphone maker, said it had approved a proposal "to further increase the level of salaries and wages payable by the Company to its staff engaged on its production lines in the Shenzhen area".
The base salaries and wages of workers, leaders and supervisors in Foxconn's Shenzhen factory would be further adjusted from 1,200 yuan ($176) to 2,000 yuan per month subject to completion of a three-month work performance assessment by Foxconn, said the statement.
For employees in other parts of China's mainland, Foxconn will review whether any further adjustment is to be made to the wages and salaries of those employees based on local living standards and relevant regulatory requirements, it added.
The salary hike would take effect on October 1 this year.
It was the second time in one week that Foxconn announced salary hike. Last Wednesday, it announced a 30-percent pay increase for workers at its Shenzhen plants starting on June 1 for what it claimed were "rising consumer prices and living costs and its corporate performance."
The pay rises came after 10 workers killed themselves and three attempted suicides at Foxconn's Shenzhen base this year.
Foxconn International also said in late Monday's statement that it was unable to determine the impact of the latest salary hike on its financial results in 2010 "because the increase in the operating costs of the Company as a result of the wage and salary increase is just one of the factors that may have an impact on the Company's operating results".
"There are other factors which may help mitigate or offset such increase in operating costs, such as increase in revenue or reduction in other operating costs," said Foxconn International.
Also, the criteria for carrying out the work performance assessment referred to above are still to be decided by Foxconn International, the only constituent stock of the benchmark Hang Seng Index from China's Taiwan, according to the statement.
Though so, Hong Kong-based securities analysts and economists said the two salary hikes in just one week was set to increase its operating cost and to have an impact against its annual results, and of course, its share price.
Peter So, HK-based head of research at China Construction Bank (CCB) International, said hiking salaries and wages twice in one week fell out of market expectations and such a move was certainly to increase Foxconn's operating cost.
So said CCB International has not yet assessed how much the salary hikes would increase Foxconn's operating cost, but it would probably cut the company's profit projections in 2010.
So said share prices of Foxconn International were likely to continue falling in Hong Kong, not only because of the salary hikes, but also the uncertain overseas economic prospects in the wake of the European debt crisis, which cast a shadow on Foxconn's exports.
Foxconn makes computers, game consoles and mobile phones for companies including Apple, Hewlett-Packard, Sony and Nokia.
So also pointed out the beneficial side of the salary hikes. " With higher salaries, Foxconn might be able to increase its production capability and efficiency, which is likely to offset the impact of salary hikes," he told Xinhua.
Macquarie Group, an international financial company, said in a note that Foxconn took the market by surprise with two salaries hikes in one week, which is expected to significantly impact Foxconn's profits this year.
Macquarie again put Foxconn International's rating at " underperform" and cut its target price from HK$5.3 to HK$4.6.
