Where Apple and SA’s prospects meet
JUST how important is Apple to global stock markets and to South Africa Inc? For the first time in 13 years, the world’s most valuable publicly traded company, Apple, recorded a slide in quarterly sales. It seems that, much like emerging market nations, the company founded by Steve Jobs has been caught out by China’s economic slowdown.
And the California-based company is predicting a further slowdown in revenue in its next quarter as iPhone sales disappoint in the world’s second-biggest economy.
Now I know this is all taking place thousands of kilometres away, but the slowdown in Apple sales may have an effect on the value of asset prices here — which might not be all bad.
When the 2008 crisis hit, the one thing investors did not want to be exposed to was banks — and most of the world’s leading banks have not yet recovered. Regulation has increased significantly over the past eight years, and the cost of running a multinational banking institution has become too burdensome. The decision by Barclays to exit its African operations is a case in point.
In the aftermath of the credit crisis, investors, fearing the worst for the developed climes of Europe and the US, looked for better growth prospects in emerging markets and in particular China. Any country whose commodities were feeding China’s insatiable growth stood to benefit. Aided by unprecedented stimulus injections by the world’s three leading central banks — the US Federal Reserve, European Central Bank and the Bank of England — the stock markets and currencies of emerging market countries found a flood of support.
Out-of-favour mining companies in South Africa didn’t benefit much because of power restrictions and fractious labour relations — but retailers such as Woolworths, Mr Price and Shoprite did.
But as soon as growth concerns about China were cemented by worrying data from Beijing, the emerging market growth story lost vibrancy. This was exacerbated by a growing belief that the US economy was beginning to find solid ground, meaning the quantitative easing experiment initiated by former Fed governor Ben Bernanke was nearing its end.
And when it came to an end in October 2014 and money flowed out of emerging markets back into developed markets, the search for growth was not in Europe, which is still hobbling along, but in the US — and in particular its tech stocks such as Apple, Facebook (which listed four years ago) and Twitter.
Facebook continues to surprise and do well, but Apple and Twitter investors are in jittery territory.
To expect Apple to continue its growth trajectory was always rather fanciful. And how Twitter will meet any of the market’s future growth
Apple’s sales may have an effect on the value of asset prices here
expectations is beyond a tech dinosaur like me. With the inevitable tech wobble finally here, just where will money flow to next? Certainly nowhere near banks — at least not on the scale seen before 2007.
What about commodities? That’s the only reason I can find for oil being at the $50 mark, despite a flooded market. No producers — and especially troubled ones such as Nigeria — have closed the taps.
Other commodities have found support. Gold has held firm, platinum is trading above $1 000 — our biggest export earners.
Which is why Apple’s fate matters. Its prospects, given its dominance in the digital world, will shape what happens in economies still in an analogue world — like South Africa’s.