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

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Despite official data from China indicating that factory activity fell faster than expected in November, Asian stocks were mostly higher on Wednesday as speculation continued to swirl that China intends to reopen its economy.

Hong Kong’s Hang Seng Index followed yesterday’s gain of 5.24% with another positive session, closing up 2.16% and taking its November gains to over 26%. Crude oil also continues to benefit from hopes of looser Covid restrictions, with 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 0.16% and 0.59% respectively, while the Dow Jones finished flat, up 0.01%.

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

Apple’s share price has been depressed recently due to supply concerns due to strict lockdown measures and social unrest in China, where the vast majority of Apple products are made. However, while many assets benefited yesterday from speculation about a relaxation in China’s zero-Covid policy, Apple’s fall reflected concern that the damage may already have been done.

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

If this missing forecast were accurate, it could be a big blow to Apple’s earnings in what is traditionally their strongest quarter. In addition, Kuo wrote that these missed sales could be lost altogether, rather than simply delayed until a time when supply recovers.

This explains then why Apple fell in the last sessions. But are Apple shareholders panicking about the long-term?

Apple – The Big Picture

Year to date, Apple shares have fallen 20%. While this is more pronounced than the broader S&P 500’s 17% drop, it is much 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 during 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 investors value much more during uncertain times.

The tech giant’s stable of products is incredibly popular with consumers who, once lured into Apple’s ecosystem, tend to stick around and become loyal customers who view the latest gadgets as a necessity. Therefore, Apple has the enviable characteristic of being able to generate a reliable stream of income.

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

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

Pictured: Admirals MetaTrader 5 – Apple Weekly Chart. Date range: 3 April 2016 – 29 November 2022. Date Captured: 30 November 2022. Past performance is not a reliable indicator of future results.

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This material does not contain and should not be considered as containing investment advice, investment recommendations, an offer or solicitation for any transactions in financial instruments. Please note that such business analysis is not a reliable indicator of any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks involved.

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