Apple Inc. (NASDAQ:AAPL) held its World Wide Developer Conference key note on Monday but the firm’s shares barely moved on Tuesday. The new product announced were hoped to move the stock out of its current fugue, but there is something else holding the shares down. China’s slow down isn’t getting better.
It was clear from the key note that the company is moving a great deal of its focus onto China. Siri is now equipped with Chinese language recognition, Chinese search engine Baidu is integrated into Safari, and sharing has been enabled for Chinese video hosting sites. Apple is looking to China for growth.
That much is clear. Apple’s iPhone is incredibly popular in China, and as the US market becomes increasingly flooded with smart phones the firm needs somewhere else to expand into. China is the world’s largest market and growth in the last decade has allowed luxury products like Apple’s consumer electronics to see more sales in the region.
There is a problem with that hypothesis however and it is one of the reasons Apple’s shares haven’t moved since the conference on Monday. China is slowing down and that slow down will disproportionately hit Apple’s growth as sales in the East Asian giant.
China’s growth has slowed for five straight quarters. In the first quarter of 2012 the country grew by 8.1 per cent. That would be welcomed in almost any other country, but it was the worst period of growth in China in three years. There is a growing housing bubble in many of China’s cities and Europe’s problem are rattling the country’s exports.
There are some moves being made to remedy the problems. China reduced its interest rates for the first time in four years earlier this month. The government is using stimulus programs in targeted parts of the country to alleviate some of the problems.
That won’t be enough for Apple however. Investors are looking to China for the firm’s next sales spike and data from the firm’s fiscal second quarter demonstrated the growth in the country. China’s outlook is nowhere near as good now as it was earlier in the year, and Apple will suffer as a result.
Apple investors are worried that the firm will not get the benefits from China that it needs to continue growing on its stellar path. Chinese stagnation is bad for many firms and the world economy in general but Apple will be hit particularly hard as its growth slumps.