Hang Seng Index

Asian stocks follow Wall Street lower as Apple suppliers slump in Hong Kong amid rumours of a cut in iPhone orders

  • Hang Seng Index falls 2 per cent to finish Tuesday at 25,840.34, while Shanghai Composite slumps 2.1 per cent
  • Apple supplier stocks fell while Xiaomi bucks the trend to jump 8 per cent
PUBLISHED : Tuesday, 20 November, 2018, 10:26am
UPDATED : Tuesday, 20 November, 2018, 11:14pm

Asian markets suffered heavy losses on Tuesday after US technology stocks slumped overnight. Apple’s iPhone suppliers listed in Hong Kong fell amid rumours they may face a cut in orders.

The benchmark Hang Sang Index fell 2 per cent, or 531.66 points, to close at 25,840.34. Among the biggest losers were insurer AIA, which fell 4.3 per cent to close at HK$62.75 and internet giant Tencent Holdings, which lost 3.3 per cent to finish at HK$281.60.

Apple-related stocks listed in Hong Kong fell more than the broader index, with AAC Technologies Holdings down 3.7 per cent to HK$53.95 and FIT Hon Teng 3.9 per cent lower at HK$3.49. Tongda Group Holdings fell by 4.2 per cent to 91 HK cents and Cowell e Holdings closed down 3 per cent at 96 HK cents.

They fell after their customer, smartphone maker Apple, lost nearly 4 per cent in the US on Monday when market rumours surfaced that the company had slashed production orders substantially for its new iPhone models.

“Hong Kong Apple suppliers or related stocks are all under selling pressure as their income would be hard hit if Apple were to cut down its orders from them. These Apple related stocks are likely to continue to face pressure in the near-term,” said Louis Wong Wai-kit, director of Phillip Capital Management.

Another smartphone maker, China’s Xiaomi, enjoyed very different fortunes. The world’s fourth largest smartphone marker jumped 8.4 per cent to close at HK$14.74 on Tuesday after Goldman Sachs raised its 12-month target price to HK$24 from HK$23.

The investment bank said Xiaomi had delivered a third quarter result in line with expectations, with internet revenue up 86 per cent year on year to 4.7 billion yuan (US$680 million).

In the mainland, the Hang Seng China Enterprises Index, known as the H-shares gauge, was off 1.6 per cent to close at 10,466.11.

The benchmark Shanghai Composite Index dropped 2.13 to close at 2,645.82, and the Shenzhen Component Index slid down 2.8 per cent to 7,879.52.

Elsewhere in the region, Japan’s Nikkei 225 fell 1 per cent to close at 21,583.12, South Korea’s Kospi lost 0.9 per cent, and Taiwan’s Taiex shed 0.9 per cent. The Sydney All Ordinaries slipped 0.8 per cent.

“The Hong Kong and Asian markets fell because of the gloomy sentiment in the US where it saw the tech stocks slump. The outlook in the near term remains negative and the Hang Seng Index is expected to trade around the level of 25,000 to 25,600,” Wong said.

Wong said hopes of a stock market rebound hinged on the outcome of an upcoming meeting between Presidents Donald Trump and Xi Jinping at this month’s G20 meeting and whether they can move towards an agreement to ease their trade war.

All three major US indices fell sharply on Monday, as big technology players sank and trade-war worries grew after US and Chinese officials failed to make headway at a regional summit at the weekend.

The Dow Jones Industrial Average closed down 1.6 per cent, the S&P 500 index ended 1.7 per cent lower and Nasdaq tumbled 3 per cent.

Among other leading technology companies, Amazon fell 5 per cent and Facebook dropped 5.7 per cent.

Ryan Chan, associate director at Eddid Securities and Futures, said the selling pressure on tech stocks would continue.

“Previously, investors were willing to pay a high premium to buy the tech stocks as they believed they would enjoy high growth. However, Apple and other tech stocks showed their revenue is growing slower – hence the correction of their share price,” Chan said. “The outlook is still full of uncertainties and investors should not rush to hunt bargains among these tech stocks.

“Globally, many smartphone makers saw a slowdown in sales but Xiaomi is the only one that still showed a strong result in the third quarter. This has led investors to shift their investment from other tech stocks to Xiaomi.”