Trade war bites as Apple leads plunge in tech stocks

Apple's sales warning stoked global growth fears, with most markets across Asia ending lower yesterday. European markets opened weak, led by companies with exposure to China. The US tech giant lost US$55 billion (S$75 billion) - or nearly 8 per cent
Apple's sales warning stoked global growth fears, with most markets across Asia ending lower yesterday. European markets opened weak, led by companies with exposure to China. The US tech giant lost US$55 billion (S$75 billion) - or nearly 8 per cent of its stock value - after the announcement.PHOTO: BLOOMBERG

S'pore suppliers had signalled earnings woes even before US tech giant cut sales projections

Even before Apple cut its earnings guidance for the first time in nearly two decades - and sent its own stock and markets around the world tumbling - local Apple suppliers such as Hi-P International had sounded warnings as trade war tensions began to bite.

Listed as one of Apple's top 200 suppliers globally, the Singapore-listed contract manufacturer, which makes keypads and SIM card trays for the US tech giant, had lowered its third-quarter guidance for both revenue and profit more than two months back, on Oct 14 last year.

Apple's own shares and those of its suppliers and retailers tumbled across the globe yesterday, dragging the broader tech sector down.

The shock waves had started to spread on Wednesday in the United States after the tech giant downgraded its first-quarter sales projections, citing slowing Chinese growth amid trade tensions with the US and fewer upgrades to iPhone models. Apple lost US$55 billion (S$75 billion) - or nearly 8 per cent of its stock value - after the announcement.

Most markets across Asia ended lower yesterday after Apple's sales warning stoked global growth fears. European markets opened weak, led by companies with exposure to China. There were wild moves in the currency markets as the yen, seen as a relatively safe asset, surged.

The news from Apple triggered a flash crash in the currency markets.

Most markets across Asia ended lower yesterday after Apple's sales warning stoked global growth fears. European markets opened weak, led by companies with exposure to China. There were wild moves in the currency markets as the yen, seen as a relatively safe asset, surged.

That added to already fragile sentiment in a week when manufacturing gauges across the world's biggest economies, including China's, all weakened, showing that the trade war is starting to have an impact on economic activity.

Technology export-dependent economies like Taiwan fell 0.65 per cent, while South Korea fell 0.81 per cent as shares of Apple suppliers Samsung Electronics and SK Hynix dropped 2.97 per cent and 4.79 per cent, respectively. Hong Kong ended 0.26 per cent lower.

In Singapore, the Straits Times Index finished 0.86 per cent lower. Hi-P slid 2.84 per cent to 85.5 cents. Among other suppliers, Jadason Enterprises was unchanged at two cents and Memtech International rose 1.28 per cent to 79 cents.

 
 
 

Printed circuit board maker Jadason, which reportedly has a customer that supplies to Apple, swung into a net loss of $245,000 in the third quarter, from a profit of $1 million a year ago. The company also warned that the outlook for the second half is hit by the trade war, which affected its end customers, according to CGS CIMB Research.

Hi-P also reported third-quarter earnings that were below expectations, blaming "a decline in market demand due to economic uncertainty, and a slower ramp-up for certain new products in the third quarter". Apple accounts for about 40 per cent of Hi-P's revenues.

DBS Group Research, which downgraded the stock to a "hold", noted: "The recent trade war between the US and China has created uncertainty and margin pressure within the supply chain. Hi-P, with six out of nine manufacturing plants in China, is not spared. Its share price has shed about 70 per cent from its peak since the trade war started. In terms of location of customers, based on full-year 2017 revenue, 59 per cent were from China and 24 per cent from US."

As a result of China's slowdown and trade tensions, 25 of the largest technology stocks have generated a median decline of 16 per cent last year compared with a median gain of 72 per cent in 2017, according to data provided by SGX MyGateway.

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A version of this article appeared in the print edition of The Straits Times on January 04, 2019, with the headline 'Trade war bites as Apple leads plunge in tech stocks'. Print Edition | Subscribe