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Tech Shifts from China to New York

Plus500 | Tuesday 16 January 2024

Although stateside stock markets were closed on Monday, market news from around the globe hasn’t ceased making waves. Traders in Asia pushed the values of several shares downward, while tech giant Apple is gearing up for changes in order to avoid regulatory issues in the United States. Let’s take a closer look:

An image of the Chinese and American flags

Asian Tech Stocks’ Slump

Asian shares have hit a downturn this Tuesday. Hong Kong’s Hang Seng Index (Hong Kong 50), has dropped by over 2.1% as of the time of writing, contributing to a regional loss of confidence due to concerns over Chinese markets. The absence of market indicators from U.S. Indices, which were closed on Monday, may have left investors across the Pacific with a feeling of uncertainty.

Tokyo's Nikkei 225 Index (Japan 225) fell by just under 0.8%, breaking a New Year's winning streak that had propelled it to a 34-year record on January 15th. This trend reversal may have been connected to the suggestion by a former central bank official that the Bank of Japan is preparing to end the policy of negative interest rates. How the BoJ plans to proceed if and when it changes direction from its course of monetary easing remains to be seen.

Technology companies seemed to have been especially hard-hit on Asia’s trading floors today. Food delivery titan Meituan (3690.HK) fell 2.2%, while Tencent (0700.HK) hit a 2.3% slump as of the time of writing.

Chinese Data Incoming

On Wednesday, January 17th, Chinese authorities are expected to provide a GDP update, with forecasts anticipating a quarterly increase in annual growth to 5.3% in the last quarter. However, concerns persist about a potential slowdown in the world's second-largest economy, particularly as Beijing deals with a crisis in its property sector and subdued consumer demand. Unless China enacts reforms to stimulate spending, growth rates could go even lower in the near future, potentially spelling trouble for market outcomes across the continent.

Apple Makes Adjustments

In order to extricate itself from an intellectual property dispute that has disrupted Apple Watch sales, Apple (AAPL) is reportedly removing a blood-oxygen sensor from some of its smartwatches. The company faced a temporary halt in sales last month due to a U.S. import ban triggered by a ruling from the U.S. International Trade Commission, stating that Apple had violated patents related to the blood-oxygen tool owned by medical technology company Masimo (MASI).

To comply with the import ban, the U.S. Customs and Border Protection agency approved technical changes to the watches, which include the removal of the blood-oxygen sensor. While the removal aims to prevent further sales disruptions, it raises questions about Apple's commitment to its health-related features.

Sales of the affected Apple Watch models have resumed temporarily pending a legal review. An ongoing appeal is in progress, and a decision on Apple's request for a permanent stay on the U.S. ban is expected soon. If the stay is not granted, the removal of the blood-oxygen feature will be implemented during the appeals process, which is anticipated to last a year or more.

Masimo had accused Apple of stealing technology related to blood-oxygen monitoring in its watches, particularly the Series 9 and Ultra 2 models. The removal of the blood-oxygen feature marks a rare instance of a health-related component being excluded from Apple devices due to a patent dispute.

Despite the Apple Watch representing about 5% of the company's fiscal 2023 sales, or approximately $18 billion, it plays a significant role in Apple's broader health ambitions. Since its launch in 2015, the Apple Watch has dominated the smartwatch market, comprising 30% of all smartwatch shipments and nearly 60% of sales.

The ongoing legal troubles with Masimo underscore the challenges Apple faces as it expands into the health market, where competitors are willing to defend their patents aggressively. The relationship between Apple and Masimo dates back to 2013, with Apple initially considering acquiring Masimo before hiring some of its executives and engineers, leading to legal disputes between the two companies. Apple shares have fallen by 3.5% since the beginning of the year, but it remains to be seen how this latest turnaround may affect shares when trading in the United States opens today. (Source: The Wall Street Journal)

Conclusion 

In conclusion, although 2024 has just begun, it seems that the year ahead is shaping up to be as full of highs and lows as 2023. How things will play out on trading floors from New York to Hong Kong remains to be seen.


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