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Asia ETF Roundup (Market) – July 2018

U.S. Fed keeps rates on hold on 1 August; Chinese Yuan Down 2.9%; China Q2 GDP growth at 6.7%.

Jackie Choy, CFA 09/08/18

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

Major Markets Performance

Many global equity markets delivered positive performance during the month of July. The S&P 500 gained 3.6% and the U.K.’s FTSE 100 rose 1.5%. Many of the emerging- and frontier markets rebounded last month. Most notably, Brazilian stocks surged 11.7%. Meanwhile stocks in India, the Philippines and Thailand gained 6%-8% (all figures proxied by the respective MSCI country indices in U.S. dollar terms). Against the backdrop of the intensifying trade war tensions between the U.S. and China, the China A-share markets rose 0.2%-1.0% in local currency terms, but dropped almost 3% (MSCI China A Onshore Index in U.S. dollar terms) when accounting for the currency effect.

The U.S. dollar dropped by 0.2% in July, as measured by the ICE Spot Index. Asian currencies generally declined against the greenback. The Chinese Yuan registered a 2.9% decline against the U.S. dollar, leaving its year-to-date depreciation at 4.6%.

Precious metals’ prices continued to slide in July. This month saw declines in gold, platinum and silver prices of 2%-4%, putting their year-to-date declines at 5%-10%.

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Economic and Market News

U.S. Keeps Rates on Hold; India Raises Rates

  • U.S. Keeps Rates on Hold – On 1 August, the Federal Reserve maintained the target range for its federal funds rate at 1.75% to 2%.
  • India Raises Rates by 25 bps – On 1 August, the Reserve Bank of India lifted its benchmark policy rate by 25 bps to 6.5%. The RBI again highlighted its neutral monetary policy stance, as was the case when it last raised rates in June.

Chinese Economic Data: GDP Grew 6.7% in Q2; Inflation at 1.9% in June; Official PMI Dropped to 51.2 in July; Caixin/Markit PMI fell to 50.8

  • China recorded 6.7% GDP growth during the second quarter, surpassing the country’s 2018 growth target of “around 6.5%”, despite being down from 6.8% in the first quarter.
  • China’s inflation rate registered at 1.9% in June, up from May’s reading of 1.8%.
  • China’s official PMI reading for July dropped to 51.2 from June’s reading of 51.5. Meanwhile, the Caixin/Markit PMI for July registered at 50.8, down from June’s reading of 51.0.

 

About Author Jackie Choy, CFA

Jackie Choy, CFA  

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