$AAPL Down 6.4%, Investors Spooked by China, Margin Requirements

$AAPLShares of Apple Inc. sold off sharply Wednesday, ending the day at US$538.792, down $37.053 (-6.43 percent), on heavy volume of 36.8 million shares trading hands. A confluence of factors appears to have contributed to the sell-off, including news that Nokia secured a deal with China Mobile, some technical rules changes from a clearing house, and a report from IDC that projects Apple to lose share in the tablet market through 2016.


Nokia announced on Wednesday that it has secured a deal with China Mobile to carry the Lumia 920T, a Windows Phone 8 device. China Mobile is the world's largest carrier with many more customers than the U.S. has people, and a Lumia deal with that carrier could finally allow Windows Phone 8 to gain a toehold in the market.

Apple does not have a deal with China Mobile, though many had hoped the company could secure one for the iPhone 5. China Mobile is state-owned, and recent reports have suggests that bureaucrats involved with the company do not want to pay the subsidies Apple demands of all of its other partners.

Nokia's deal doesn't directly affect Apple or the iPhone, but it was a reminder to investors that Apple still isn't doing business with China Mobile. Some of $AAPL's value is based on expected growth in China, and those expectations are lower without a China Mobile-iPhone deal.

In other words, there may not be any direct merit in worrying about $AAPL because of Nokia, but the news spooked some investors anyway.

Technical Gobbledygook

There have apparently been some margin rules put in place by a clearing house that raise the margin requirements for investors trading shares of $AAPL. The effect of those rules, according to Barron's, is that the total number of shares those investors can own will be lower than it has.

This not only has the direct effect of limiting demand, it also carries its own spook effect on investors worried about that effect. It's a nice, tidy circle of downward pressure on the stock.

SeekingAlpha clarified that the clearing house is named COR Clearing, and that it raised margin requirements for $AAPL from 30 percent to 60 percent. That change meant that its clients had to sell off some of their $AAPL holdings to get their margin requirements in line.

The author, writing under the pen name of The Financial Lexicon, argued that there is little to be concerned about concerning COR Clearing's practical power to affect trading because it is a small clearing house, but $AAPL still sold off.

Of the three factors, this one mostly likely had the biggest role in Wednesday's retreat.


IDC issued a report on Wednesday that said Apple's share of the tablet market will decline to 49.7 percent in 2016, while Android's will decline to 39.7 percent, and Windows will increase to 10.3 percent.

It's unclear how much attention investors gave this report, which we will be covering in full in a separate article, but Bloomberg took the time to cite it in coverage of $AAPL's decline, making it worth mentioning.

AAPL Rally?

Shares in Apple hit an all time closing high of $702.10 on September 19th, but declined some 25 percent over the next several weeks. The stock began a rally in late October, but Wednesday's losses wiped out almost half of those gains.

$AAPL is up 33 percent in 2012, but if it held at Wednesday's levels through the rest of the year, it would represent the poorest performing year for the stock in years.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.