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IPhone Disappointment Hammers Suppliers, Fuels Taiwan Outflows

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Monday, September 25th, 2017
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Apple Inc.’s latest products are getting a thumbs down, at least by investors in the company’s Asian suppliers.

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 Hon Hai Precision Industry Co., which assembles the iPhone and other Apple devices, has fallen 10 percent in Taipei since Apple unveiled its collection of new gadgets for the holidays this month. Other suppliers across the region, including Taiwan’s Pegatron Corp. and South Korea’s LG Innotek Co. have plunged more than 12 percent.
 Taiwan’s $1.1 trillion equity market is particularly exposed to the swinging fortunes of Apple products, due to the dominance of parts manufacturers. Hon Hai and Taiwan Semiconductor Manufacturing Co., Apple’s main chip-maker, together make up a quarter of the Taiex total weighting, while exports account for more than half of the island’s gross domestic product.
 “Orders of the new IPhone have disappointed the market and foreign investors may continue net selling Taiwan stocks,” said Alan Tseng, Taipei-based vice president at Capital Investment Management. “The retreat of Apple suppliers has pulled down the benchmark index and could drag the index even lower in the coming month.”

Overseas investors pulled a net $677 million from the island’s stock market last week, the biggest outflows in three months. Earlier optimism that the iPhone would bolster Taiwan earnings had sent the Taiex to a 17-year high as inflows swelled. The Taiex slid 1.1 percent the close, its lowest in a month.

Apple iPhone 8 pre-orders are “substantially lower” than iPhone 7 and iPhone 6 levels, Rosenblatt Securities analyst Jun Zhang wrote in a note last week. Initial feedback suggests iPhone 8 volume is below predecessors in the U.S. and even more so in China, according to Zhang.

Hon Hai fell 2.8 percent in Taipei, while Pegatron slumped 4.4 percent. TSMC dropped for a third day. AAC Technologies Holdings Inc., another supplier, retreated 6.7 percent in Hong Kong, and GoerTek Inc. capped its biggest loss since July 3 in China’s Shenzhen.

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