By Philip Wen
Billionaire activist investor Carl Icahn has sold his entire stake in Apple on the back of concerns over China's economy and the risk of the country's influence on the stock. If he's worried, should we be too?
Icahn, who has built his wealth around making conviction calls on outlying positions, cites signs of creeping protectionism from the Chinese government – on top of already softening sales in the country – as a key reason for cashing in on his 46 million Apple shares.
"You worry a little bit - and maybe more than a little - about China's attitude," he told CNBC. He noted that the Chinese government could, "come in and make it very difficult for Apple to sell there ... you can do pretty much what you want there."
China is banking heavily on bolstering domestic consumer spending as it transitions its economy from one reliant on heavy industry, credit-driven construction and cheap exports.
Hedge fund tsar Carl Icahn has been touted by Donald Trump as a potential US Treasury secretary. Credit: Bloomberg
The concern from the likes of Icahn is that part of the strategy involves the Chinese government increasingly favouring home-grown brands to further pad the economic benefits of that spending.
It's worth noting that many of Apple's woes in China are specific to Apple. For the first time in more than a decade, the tech giant posted a quarterly sales decline - much of it attributed to a 26 per cent plunge in sales in Greater China (which includes Hong Kong and Taiwan).
While China had accounted for more than half of the company's recent revenue growth, it was now responsible for half of its year-on-year decline.
Tired brand?
Chinese consumers are not buying fewer smartphones, far from it. But in the absence of dramatic changes to its offerings, there are signs of Apple's brand getting tired in mainland China, and increasingly failing to justify the hefty price premium compared to fast-improving local brands like Xiaomi and Huawei.
Apple's smaller four-inch iPhone SE, released last month in part to target China's aspirant middle-class in smaller second- and third-tier cities, remains almost double the price of comparable Xiaomi models.
And in keeping with the Communist Party's intensifying efforts to regulate what its citizens can see from the outside world, the Chinese government blocked Apple's iBooks and iTunes Movies services – dealing a blow to Apple's hopes of growing its services offering to China's huge audience.
The shares of Australian companies such as Blackmores and Bellamy's were rocked by regulatory changes to China's cross-border e-commerce trade, restricting which products could be sold and imposing a tax on overseas goods. This was seen as helping to provide local retailers with a more level playing field.
China meanwhile has dismissed global criticism, including from Australia, that its cheap steel, spurred on by chronic overcapacity in the sector, has flooded the world and distorted global markets – accelerating the demise of steelmakers like Arrium and prompting an anti-dumping levy in Australia.
Many of Apple's woes in China are specific to Apple.
Official news agency Xinhua said blaming China for the global steel industry's woes was a "lame and lazy excuse for protectionism".
But it all points to Icahn's central thesis that if China's economic worries worsen, the levers its government will pull will favour its own rather than foreign companies.