Apple (NASDAQ: AAPL) CEO Tim Cook indicated that he has confidence in the company's business in China, especially its iPhone sales, despite investors' fears about slowing economic growth in the world's largest smartphone market that have sent stock markets around the globe spiraling downward.
This morning CNBC released an email that Cook sent to CNCB analyst Jim Cramer in which he said that Apple's iPhone sales in China have picked up pace over the last few weeks. The comments from Cook could serve to allay investors' concerns that weaker economic growth in China could stunt Apple's sales in the country. Apple's shares were down 1.64 percent to $104 in mid-morning trading, but had briefly traded at below $100 per share.
According to The New York Times, in China, the benchmark Shanghai composite stock index closed trading on Monday 8.5 percent lower, erasing all of the gains it had made in a bull market this year that started cratering earlier this summer. Stocks fell in Europe and then the United States, as the Standard & Poor's 500-stock index and the Dow Jones industrial average lurched down by more than 5 percent when trading opened. At one point the Dow lost more than 1,000 points before regaining some ground. The technology-heavy Nasdaq index was down more than 8 percent.
Part of the sell-off has been driven by fears that China's economy is weaker than the government there has acknowledged after the devaluation of China's currency, the renminbi, earlier this month. The devaluation was the biggest drop in the currency's value since the country's modern exchange rate system was set up in 1994, according to the NYT. China has been a global engine of economic growth for so long that even slowing growth is rattling markets worldwide.
"As you know, we don't give mid-quarter updates and we rarely comment on moves in Apple stock," Cook said in an e-mail to Cramer made public by CNBC. "But I know your question is on the minds of many investors."
"I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August," Cook said. "Growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last 2 weeks."
Cook said he is optimistic about Apple's prospects in China, especially because it is only starting its transition to LTE networks and more people will be lifted in China's middle class in the years ahead.
"Obviously I can't predict the future, but our performance so far this quarter is reassuring," he said. "Additionally, I continue to believe that China represents an unprecedented opportunity over the long term as LTE penetration is very low and most importantly the growth of the middle class over the next several years will be huge."
Apple, along with Chinese smartphone maker Huawei, weathered the slowdown in China better than smartphone rivals like Samsung Electronics, Lenovo, LG Electronics, HTC and others.
Apple said iPhone unit sales in China grew 87 percent year-over-year in the second quarter -- though research firm Gartner said total iPhone sales in China to end users grew 68 percent to 11.9 million units. Apple said it sold 47.4 million total iPhones last quarter, a figure slightly below what some analysts had expected.
Still, what happens in China could help shape the global economy for the rest of the year and beyond. "Asian financial markets are seeing an intensification of selling pressure in the aftermath" of China's devaluation, Claudio Piron, a strategist in Singapore for Bank of America Merrill Lynch, said on Monday in a research report, according to the Times. "The market's confidence in China's ability to deliver growth remains in question."
According to The Wall Street Journal, the Chinese central bank is preparing to flood the banking system with liquidity to increase lending, the latest in a series of moves designed to jolt the economy there.
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