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Asia stocks tumble as Apple issues revenue warning; HSBC earnings miss expectations

Shares in Asia mostly fell on Tuesday morning, as the new coronavirus outbreak continued to roil companies amid expectations it would cause a slowdown.

Hong Kong’s Hang Seng index was down around 1%.

Over in mainland China, shares edged down. The Shanghai composite declined 0.16%, while the Shenzhen component was flat. The Shenzhen composite bucked the trend, rising 0.33%.

Japan’s Nikkei 225 tumbled 1.15%, following the previous day’s losses. The Topix fell around 1%. Declines were seen across the tech sector, with Softbank down 3.47%.

In South Korea, the Kospi also slipped 1.22%. Australia’s ASX 200 declined 0.20%.

Overall, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.74%.

In its full-year 2019 results out on Tuesday, HSBC reported 2019 pre-tax profit of $13.35 billion, while revenue during the same period was $56.1 billion. That missed expectations, as analysts had predicted HSBC’s report card for last year to largely match that of 2018, when reported pre-tax profits were $19.89 billion and revenue was $53.78 billion.

Though it is headquartered in London, most of its profits come from Asia, particularly Hong Kong. 

Its Hong Kong-listed shares were down 0.93% in the morning, before the release of the earnings.

Apple suppliers in Asia fall

Meanwhile, Apple suppliers in Asia fell sharply in the morning, as the tech giant warned it may not meet its quarterly revenue forecast because of lower iPhone supply globally and lower Chinese demand as a result of disruptions from the coronavirus outbreak.

Apple makes most of its iPhones and products in China. The epidemic has caused the company to temporarily halt production and close retail stores in China. Some Apple retail stores reopened in China with reduced schedules last week.

In Asia, Japan’s Alps Alpine tumbled 3.36%, Murata Manufacturing fell 3.74%. Taiyo Yuden plunged more than 5%.

Hong Kong’s Sunny Optical dived 3.43%, and Aac Tech stumbled 2.89%. South Korea’s SK Hynix lost 0.95%, and Samsung Electronics declined 1.46%.

Over in Taiwan, Hon Hai Precision Industry, Apple’s largest supplier, declined 0.48%.

“This unexpected news confirms the worst fears of the Street that the virus outbreak has dramatically impacted iPhone supply from China/Foxconn with a demand ripple impact worldwide,” Wedbush Securities analysts Daniel Ives and Strecker Backe wrote in a note, adding that the magnitude of the impact is “clearly worse than feared.”

“While this news is a tough pill to swallow for the bulls, Apple remains a company significantly exposed to this virus issue given the company’s massive supply and demand tentacles throughout China,” they added.

Virus impact globally

The outbreak, which started in China but has since spread globally, is set to impact other companies too. In fact, it could hit as many as five million companies worldwide, a new study showed. Almost half (49%) of the companies with subsidiaries in impacted regions are headquartered in Hong Kong, while the U.S. accounts for 19%, Japan 12% and Germany 5%.

The impact on businesses in China and around the world has dragged down economic growth forecasts for the year.

Focus is now shifting to the likely economic impact of COVID-19. With data sparse it is very hard to tell, though daily pollution levels are easily available and we note the cumulative pollution for the year is around 20-25% lower than this time last year,” Tapas Strickland, director of economics and markets at the National Australia Bank, wrote in a note on Tuesday. “Overall that suggests a substantial decline in industrial activity in Q1.”

Singapore, one of the worst hit by the outbreak outside China, is set to unveil its budget on Tuesday. The Southeast Asian nation is expected to spend big, to soften the economic blow from the outbreak which has hit companies and tourism.

Currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 99.209, rising from levels earlier in the week.

The Japanese yen traded at 109.76 against the dollar, little unchanged after hitting above the 110 level briefly last week. The Australian dollar slid to 0.6692, from above the 0.67 level earlier.

Oil prices declined on Tuesday morning during Asia hours. Global benchmark Brent was down 0.66% to $57.28 a barrel while U.S. crude fell 0.31% to $51.89.

What’s on tap for Tuesday (all times in HK/SIN):

4:30 p.m.: Hong Kong unemployment data
5:00 p.m. China new loans, total social financing

— CNBC’s Yen Nee Lee, Amelia Lucas and Elliot Smith contributed to this report.

Source: CNBC

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