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Asia ETF Roundup (Market) – February 2018

Brazil, Russia Cut Rates; China’s Inflation Rate at 1.5%.

Jackie Choy, CFA 08/03/18

For the latest ETF industry news, please refer to our “Asia ETF Roundup (Industry) – February 2018”.                                                                                                             

Major Markets Performance
Global markets hit an air pocket near end-January and slid further into the early part of February before recovering somewhat in the later part of the month. Ending the month, the S&P 500 dropped 3.9%, the Nikkei retreated 4.5% while the Hang Seng Index slid 6.2%. The Chinese markets also plunged 6-9% (HSCEI -8.7%; Shanghai Composite -6.4%; CSI 300 -5.9%). The performance of the emerging- / frontier- markets was generally in the red in various degrees, with the Indian and Philippine markets posted declines of 6.9% and 4.7%, respectively (proxied by the respective MSCI country indices in U.S. dollar terms).

The U.S dollar rebounded in February (+1.8%; as measured by the ICE spot Index) and appreciated against many emerging-market currencies. The Indian Rupiah and Indonesia Rupiah depreciated 2.4% and 2.6%, respectively against the greenback. Meanwhile, the Japanese Yen appreciated by 2.3%.

Performance of the precious metals turned downwards in the month of February. Gold, silver, and platinum prices recorded monthly loss of 2.0%, 4.6%, and 2.4%, respectively.

Economic and Market News

US FOMC Releases Minutes; Brazil, Russia Cuts Rates

  • Brazil Cuts Rates by 25 bps- During the month, the Brazilian central bank cut rates for the 11th consecutive time by 25 bps to 6.75%. This rate cut further lowered the historic low of benchmark interest rates.
  • Russia Cuts Rates by 25 bps- The Bank of Russia cut rates by 25 bps to 7.50%, citing that “the balance of inflationary and economic risks has shifted slightly towards the risks to economic growth”.
  • US FOMC Minutes- Minutes of the January FOMC meeting was released on 21 February 2018 detailing the FOMC’s decision to maintain federal fund rate at 1.25%-1.50%. In the meeting, most participants highlighted that the near-time outlook was modestly stronger than previously anticipated in December. However, some participants believe that the “committee could afford to be patient” because they “saw little solid evidence that the strength of economic activity and the labor market was showing through to significant wage or inflation pressures”.



Chinese Economic Data: Inflationat 1.5% in January; Official PMI Falls to 50.3 in February; Caixin/Markit PMI Little Changed at 51.6

  • China’s inflation rate eased to 1.5% in January from December’s reading of 1.8%.
  • China’s official PMI reading for February fell closer to 50, registering at 50.3 amid Chinese New Year during the month. This compares to January’s reading of 51.3. Meanwhile, the Caixin/Markit PMI for February was 51.6, little changed from the January reading of 51.5.



Sovereign Credit Rating Changes

  • Russia- S&P upgraded Russia’s long-term sovereign credit rating by one notch to BBB-, i.e. an upgrade to investment grade.
  • Brazil- Fitch downgraded Brazil’s long-term issuer default ratings by one notch to BB-.
  • Greece- Fitch upgraded Greece’s long-term issuer default ratings by one notch to B.
About Author Jackie Choy, CFA

Jackie Choy, CFA  

Jackie Choy, CFA is the Director of ETF Research for Morningstar Investment Management Asia