You are here

Apple limits losses as tech clobbered in market rout

Apple went for a harrowing stock market ride on Monday, plummeting on concerns about China's economy, then snapping back after a rare public reassurance by chief Tim Cook.

[SAN FRANCISCO] Apple went for a harrowing stock market ride on Monday, plummeting on concerns about China's economy, then snapping back after a rare public reassurance by chief Tim Cook.

The world's most valuable tech company saw billions of dollars in worth come and go as its share price dove out of the gate, climbed into positive territory hours later and then ended the formal trading day down 2.5 per cent to US$103.12.

Apple's market bruising came as the tech sector was battered by fears of what an economic slowdown in China would do to revenue and profit, in a tumultuous day for global markets.

Google and Facebook slid nearly four percent, while Amazon tumbled more than six per cent and Netflix shed nearly seven per cent.

Microsoft lost more than three per cent while Twitter, already reeling from growth concerns, dropped 2.7 per cent.

"When China gets a cold, the entire tech market gets a fever," independent analyst Rob Enderle of Enderle Group told AFP.

Mr Cook said Apple is still seeing "strong growth" in China despite fears which have sparked a global market rout.

Mr Cook responded to a query from CNBC about the sharp drop in Apple shares amid the market upheaval in China and around the world.

"As you know, we don't give mid-quarter updates and we rarely comment on moves in Apple stock," Mr Cook wrote to CNBC's Jim Cramer in an email released by the cable channel. "But I know your question is on the minds of many investors." Mr Cook noted that he gets updates daily on Apple activity in China "including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August." He said that "growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last two weeks." Mr Cook added: "Obviously I can't predict the future, but our performance so far this quarter is reassuring. Additionally, I continue to believe that China represents an unprecedented opportunity over the long term." Apple stock has slumped more that 20 per cent from its peak earlier this year at US$133.

Apple shares fell as much as 12 per cent in morning trade, but then swung back to positive territory, and were up 2.1 per cent at US$108 shortly after 1700 GMT before falling into the red again.

"The China market took it down, then Tim Cook caused it to pop back up," Mr Enderle said of Apple stock price.

"It has been kind of a ping-pong ball today." Global Equities Research analyst Trip Chowdhry also credited Cook's assurances about Apple performance in China with causing the share price to regain ground.

Analysts interviewed by AFP felt that Apple would keep its footing in China despite economic conditions there.

Cantor Fitzgerald said in a note to investors that it felt China worries weighing on Apple shares were "way overblown." The research firm reasoned that conditions in Apple's favor in China included the rise of the middle class; expansion of 4G mobile telecommunications networks, and the California company's expansion across the country.

"Apple is going to be OK in China," Mr Enderle said.

"Apple is a status luxury brand and status is big in the China market; they will give up a lot things before they give up buying iPhones." China and the United States are Apple's biggest markets, so trouble in either of those markets spooks investors.

Worry about the Chinese economy has hammered tech stocks across the board, even companies such as Google or Facebook, which aren't in the country.

Mr Chowdhry sees the tech market as "diverging," with innovative companies such as Apple, Microsoft, Oracle and Tesla poised to overshadow companies with "weak fundamentals" during a recovery.

Some investors appeared to be riding the wave, selling early to lock in gains and then buying tech company shares weighed down by the market, according to Nasdaq Advisory Services analyst Michael Stiller.


BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to