Hon Hai Precision Industry Co (鴻海精密) is likely to wait for a central bank decision on interest rates at its quarterly policymaking meeting before deciding whether to issue new bonds, an analyst said yesterday.
Hon Hai, the world’s largest contract electronics maker, announced on Wednesday that it had cancelled a plan to issue NT$6 billion (US$202 million) in five-year unsecured corporate bonds as the bidding failed to meet the company’s expectations.
The firm said it is watching -market conditions to determine how to proceed with fundraising plans following the cancelation.
Grand Cathay Securities (大華證券) analyst Mars Hsu (徐振家) said that interest rates have risen following five key interest rate hikes by the central bank since the second quarter of last year as the local economy has rebounded strongly from the global financial meltdown.
However, Hsu said, the situation has now changed as global and local economic fundamentals have been impacted by debt problems in the eurozone and a slowing US economy.
“The market now widely expects the central bank to stop the interest rate increase cycle at its quarterly meeting,” Hsu said. “I think Hon Hai is waiting for the bank’s decision to confirm interest rate movements.”
The central bank’s quarterly policymaking meeting is scheduled for Sept. 29. After recent interest rate hikes, the discount rate stands at 1.875 percent.
KBC Concord Asset Management Co (康和比聯投信) analyst Henry Chen (陳志恆) said that because the US Federal Reserve has announced that it will maintain a high level of liquidity until mid-2013 to boost the national economy, global interest rates will stabilize over the next one to two years.
Chen said Hon Hai was likely to wait until a clearer picture of the global financial market takes shape.
Hsu said that Hon Hai is sitting on large cash reserves, so the company was in no hurry to raise funds for future expansion.
Last month, Hon Hai announced it would issue up to NT$12 billion in unsecured corporate bonds in phases before the end of the year.
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