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iPhone 8 Disappointing, Stocks of Distressed Apple Suppliers

Apple Inc.’s latest products seen no better than its predecessor, at least for foreign investors. This has immediately dampened the performance of Apple suppliers in Asia.

Hon Hai Precision Industry Co., which assembles iPhone and other Apple devices, has slumped 10% in Taipei since Apple unveiled its latest mobile phone collection this month.

Other suppliers in the region, including Pegatron Corp. from Taiwan and LG Innotek Co. from South Korea, has slumped more than 13%.

Taiwan’s equity market worth US $ 1.1 trillion is closely linked to the performance of Apple products, given the dominance of spare parts manufacturers in the country. Hon Hai and Taiwan Semiconductor Manufacturing Co., Apple’s major chipmaker, contribute a quarter of the total weight of the Taiex stock index.

“Orders for the new iPhone have disappointed the market and foreign investors can continue to sell on Taiwan stocks,” said Alan Tseng, vice president of Taipei-based Capital Management Management, as quoted by Bloomberg, Monday (25/09/2017).

“The decline in Apple supplier performance has hit the benchmark index and could drag the index lower again in the coming months,” he continued.

Previous optimism that the iPhone will boost earnings of Taiwanese issuers has brought the Taiex index to its highest level in 17 years as swollen inflows.

But last week, foreign investors withdrew US $ 677 million worth of net funds from Taiwan’s stock market, the biggest outflow of capital outflows in three months. The Taiex index today is down 0.8% at 11:21 am local time, moving towards the lowest close in a month.

“The number of Apple iPhone 8 pre-orders is much lower than (pre-orders for) iPhone 7 and iPhone 6,” said Rosenblatt Securities analyst Jun Zhang in his research last week. According to Zhang, preliminary information shows the number of iPhone 8 volumes under its predecessor in the US and even lower in China.

Hon Hai shares today dropped 1.9% in Taipei along with other suppliers. AAC Technologies Holdings Inc. shares plunged 4.8% in Hong Kong, while China Airlines Ltd., which previously rallied on speculation that cargo activity will profit from Apple orders, slumped 3.9%.

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