Asian Stocks and Crude Oil Climb as S&P 500 and Nasdaq Fall

Despite official data from China indicating that factory activity declined at a faster rate than had been expected in November, Asian stocks were largely up on Wednesday, as speculation continues to swirl that China intends to reopen its economy.

Hong Kong’s Hang Seng Index followed up yesterday’s gain of 5.24% with another positive session, closing up 2.16% and taking its November gains to more than 26%. Crude oil also continues to benefit from hopes of looser Covid restrictions, with both Brent and WTI up on Wednesday morning.

Yesterday, on Wall Street, many US listed Chinese stocks enjoyed positive days, with Alibaba and JD.com both soaring 5.25% and 6.69% respectively.

However, the S&P 500 and Nasdaq composite closed the session lower, down by 0.16% and 0.59% respectively, whilst the Dow Jones ended flat, up by 0.01%.

Weighing on the S&P 500 and Nasdaq were tech heavyweights Alphabet, Tesla and Amazon, with losses of 0.90%, 1.14% and 1.63% respectively. But weighing heaviest was the world’s largest company, Apple, which closed the session down by 2.11%, taking its total losses over the last three sessions to 6.55%.

The Apple share price has come under pressure recently over supply concerns due to strict lockdown measures and social unrest in China, where the vast majority of Apple products are made. However, whilst many assets benefitted yesterday from speculation of a relaxation in China’s zero-Covid policy, Apple’s drop reflected concern that the damage may have already been done.

Yesterday, TFI Asset Management analyst Ming-Chi Kuo wrote that he expected total iPhone 14 Pro and iPhone 14 Pro Max shipments during the current quarter to be 15-20 million units lower than expected. This predicted drop in shipments is largely due to the worker protests which took place in the Xhengzou iPhone factory last month.

Should this shortfall prediction be accurate, it could be a big blow for Apple’s revenue in what is traditionally their strongest quarter. Furthermore, Kuo wrote that these missed sales could be lost altogether, rather than simply deferred to a time when supply recovers.

This explains then why Apple has fallen in recent sessions. But should Apple shareholders panic about the long-term?

Apple – The Big Picture

Year to date, Apple shares have fallen 20%. Whilst this is more pronounced than the wider S&P 500’s drop of 17%, it is far shallower than the losses suffered by other tech heavyweights. Alphabet, Amazon, Tesla and Meta Platforms, for example, are down 34%, 45%, 49% and 67% respectively over the same time period.

Part of the reason Apple has weathered the recent economic storm better than its rivals is its remarkable financial strength, something which investors appreciate a lot more during uncertain periods.

The tech giant’s stable of products are incredibly popular with consumers who, once enticed into Apple’s ecosystem, tend to get stuck and become loyal customers who view the latest gadgets as something of a necessity. Consequently, Apple has the enviable characteristic of being able to generate a reliable stream of revenue.

In the latest quarter, Apple reported $20 billion in net income, taking its 12-month total to almost $100 billion. At the end of September 2022, the company had over $48 billion in cash and cash equivalents plus a further $121 billion in non-current marketable securities.

However, investors should remain wary of the current headwinds, not least of all the uncertain economic outlook, which is likely to continue causing volatility in the short-term. Furthermore, whilst the pandemic will presumably end at some point and production will resume as normal, the current supply issues highlight how dependent Apple currently is on China.

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