The impact of China’s economic slowdown on Apple
On August 21, Apple’s (AAPL) stock declined by 6%. Investors are worried about the impact that China’s slowing economy could have on Apple—China is the second most valuable market for Apple after the US. China (FXI) reported a steep fall of 8.3% in its exports in July 2015 on a year-over-year basis.
Another indicator of China’s slowing growth was the sixth consecutive month of shrinking manufacturing activity, which shows weak factory output in China. China is now targeting 7% growth in 2015, the slowest in the last 25 years.
To counter this slowdown, China’s central bank announced the devaluation of the yuan by 1.9% against the dollar on August 11. The yuan’s devaluation could have a detrimental impact on Apple, which we discussed in How Will China’s Yuan Devaluation Affect Apple?
Major technology companies had a steep fall last week
These factors made investors jittery and along with Apple, other major technology companies’ stock also saw a steep decline. In the past week, Netflix (NFLX) stock fell by about 20%, Facebook’s (FB) stock fell by 10%, and Amazon’s (AMZN) stock fell by more than 10%. Qualcomm (QCOM) derives about 50% of its revenues from China, which was the main reason why its stock declined by 10% in the past week.
Apple’s stock was declining even before the China worries started. Its stock reached an all-time high of $132 just before the company announced its June quarter earnings on July 21. However, investors were expecting better iPhone sales, which led to Apple’s stock declining by 6% on the day the company’s earnings were announced. The above chart shows Apple’s stock price movement over the past few weeks.