Apple stock bounces back from China’s Black Monday crash

Apple outperformed its Silicon Valley rivals in one of the worst market tumbles in recent years, eventually closing with its stock down 2.5%. It followed a rollercoaster plummet-and-bump thanks, in turn, to fears about China’s ailing economy and a tactical email from CEO Tim Cook assuaging investors of Apple’s continued growth in Asia.

Concerns over China’s “Black Monday” tattered share prices across a range of industries yesterday, with technology bearing the brunt of the falls. Facebook, Google and Twitter all witnessed a plunge in stock value, but Apple managed to claw back lost ground following an email sent by Tim Cook to CNBC’s Jim Cramer. The email ensured the host of finance program Mad Money that Apple was enjoying a “reassuring” quarterly performance due to continued growth in China.

“I can tell you that we have continued to experience strong growth for our business in China through July and August,” Cook wrote. “Growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the Apple Store in China during the last 2 weeks.”

When the Nasdaq opened on Monday morning, Facebook was down 12.1%, Google was down 6.6%, Twitter was down 11% and Microsoft was down 5.8%. Some of those companies continued to fall lower – at its lowest point Twitter was down 17.2%. Apple opened on Monday down 10% and, while Apple’s stocks bounced back following Tim Cook’s email, as the day continued this upward jolt began to fade and Apple eventually closed Monday’s trading session down 2.5%.

Closely entwined with China

Regardless of eventually settling in the red, closing with less damage than its Silicon Valley rivals is particularly impressive when you consider that Apple is more closely entwined with China than any other US tech giant – much of Apple’s manufacturing is done in the country and China is the company’s second biggest market for iPhones.

“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,” Cook wrote in his email.

Cook’s gesture towards the growing middle class will be seen as a move to refute worries about China’s slowing growth, as well as quelling murmurs that China’s smartphone market is nearing saturation. Last week, market research firm Gartner Inc reported that smartphone sales in China fell in the second quarter for the first time. “China has reached saturation — its phone market is essentially driven by replacement, with fewer first-time buyers,” Anshul Gupta, research director at Gartner, told Reuters at the time.

Are fears about Apple’s performance in China overblown? The company’s increasing reliance on the region may be a source of worry if China’s economy continues to struggle, but Cook’s email points to the long-term gain in China as a generational shift opens up a wider middle class market. With China’s stock market still very much in turmoil, the next few days could see more ripples spread across Asia to Silicon Valley – with Apple very much at the centre of the storm.