Apple suppliers recover in Hong Kong after initial pounding on iPhone sales slowdown worries

  • AAC Technologies rises by 0.2 per cent at close; other Hong Kong suppliers recover or narrow midday losses
  • Japan Display falls the most, by 9.52 per cent
PUBLISHED : Tuesday, 13 November, 2018, 10:15am
UPDATED : Tuesday, 13 November, 2018, 10:39pm

The Hong Kong-listed suppliers of Apple recovered in afternoon trading on Tuesday, following a drop in morning trading. Stocks fell initially because of an overnight technology stock rout in the US led by fears of a steep decline in Apple shares and an escalating US-China trade war.

AAC Technologies rose by 0.2 per cent to close at HK$53.2, after plunging by 7 per cent to HK$49.05 in the morning, weighed down by an expected slowdown in the sales of the iPhone. FIT Hon Tech rose by 0.3 per cent to close at HK$3.65, reversing a loss of 0.8 per cent to HK$3.61. Tongda Group Holdings fell by 1 per cent to close at 96 HK cents, narrowing down a drop of 3 per cent in the morning. Cowell sank 3 per cent to HK$1, narrowing down a decline of 4 per cent.

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The broader Hong Kong market recovered too, closing 0.62 per cent, or 159 points, higher at 25,792, after initially falling by 2.1 per cent in early trading.

“We have seen some investors buying these technology stocks in Hong Kong in the afternoon, as their share prices had dropped to a cheap level, which was attractive,” said Robert Lee, executive director at brokerage firm Grand Finance Group.

“A recovery in mainland China shares in the afternoon also helped Hong Kong-listed Apple suppliers and other technology stocks bounce back.”

Apple suppliers in Japan, however, did not fare as well. Japan Display was down by 9.52 per cent, Murata Manufacturing dropped 4.76 per cent and TDK lost 6.27 per cent on Tuesday. These stocks led declines on the benchmark Nikkei225, which dropped by 2 per cent, or 459 points, to 21,810.52.

“The Japanese market has its own internal problems, which is why its Apple suppliers have performed differently from those in Hong Kong, although all of them are expected to be affected by the slowdown in iPhone sales. Looking ahead, these stocks will still face the uncertainties of the overall trade war between China and the US,” said Lee.

South Korea’s Kospi was also down by 0.44 per cent, while the Sydney All Ordinaries lost 1.74 per cent.

In China, the Shanghai Composite Index closed 1 per cent higher at 2,654.88 after falling 1 per cent initially in the morning. The CSI 300, which tracks the largest stocks listed in Shanghai and Shenzhen, also edged up 1.01 per cent to 3,237.38. The Shenzhen Component Index rose by 1.7 per cent to close at 7,963.66.

Other technology heavyweights too rose in the afternoon after slight initial losses. Bellwether Tencent Holdings rose 1.4 per cent to HK$274 and Sunny Optical advanced 2.85 per cent to HK$73.95. Carmaker Geely Automobile added 5 per cent to reach HK$15.1.

Apple’s shares fell 5.04 per cent in the US on Monday after the technology giant’s supplier Lumentum Holdings slashed its earnings and revenue outlook.

Lumentum said that lower demand from one of its largest customers for laser diodes for 3D sensors had caused it to “materially reduce shipments” during the quarter ending December. Although Lumentum did not name the customer, its annual report lists Apple as its largest client, accounting for 30 per cent of its revenues.

Apple’s fall spread to other technology stocks, and this was compounded by the US government’s threat to escalate its trade war with China, exacerbating declines in US indices – all three major indices were down 2 per cent or more on Monday.

“Apple stocks rose substantially last year and their valuations were exceptionally high. But the expected slowdown of iPhone sales has added selling pressure on these companies,” said Ryan Chan, associate director at Eddid Securities and Futures.

“In addition, the US government on Monday indicated it would add more trade control measures on China, which has led the market to worry about an economic slowdown on the mainland. The market is likely to continue trading between 24,500 to 25,000, but it will be hard to break through the 26,000 level.”

Ben Kwong Man-bun, a director at brokerage house KGI Asia, said other technology stocks such as Tencent could also suffer because of a slowing economy brought about by the trade war.

He said a strong US dollar was also hurting the stock market because whenever the greenback strengthens it leads to capital outflows from emerging markets. “As the US dollar reached its strongest level in 18 months against the euro and pound on Monday, this led to a fall in Asian markets,” said Kwong.

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Meanwhile, the offshore yuan – traded by international investors – strengthened by 0.2 per cent on Tuesday to trade at 6.9497 per US dollar, while the onshore yuan also strengthened by 0.12 per cent. This came after the People’s Bank of China fixed the yuan midprice at 6.9629, up 0.2 per cent from its last fix.

“In spite of what appeared to be PBOC smoothing, the US dollar remains in the driver’s seat on follow-through from last week, when the FOMC signalled no dovishness, suggesting the policy divergence between the Fed and PBOC could accelerate,” said Stephen Innes, head of trading in Asia-Pacific at forex trading platform Oanda.