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Asia ETF Roundup (Market) – August 2018

Argentina puts rates at 60%; India, UK, Philippines, Indonesia raise rates.

Jackie Choy 06/09/18

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

Major Markets Performance

Major global equity markets took varied paths during the month of August. Following new rounds of tariffs imposed by the U.S. and China, the Chinese onshore markets suffered declines of around 5%. Meanwhile the S&P 500 notched new all-time highs during the month. Performance among emerging- and frontier-markets was mixed. The central bank of Argentina increased rates drastically, pushing them to 60% as the country’s currency plunged amid concerns over the country’s solvency. Elsewhere, the Turkish lira plummeted to a record low against the greenback during the month as inflation continues to run high. Stocks in Brazil, Russia and Pakistan tumbled 12.0%, 7.0% and 6.3%, respectively. On the other hand, stocks in Thailand and the Philippines rose around 2% (all figures proxied by the respective MSCI country indices in U.S. dollar terms).

The U.S. dollar rose by 0.7% in August, as measured by the ICE Spot Index. The performance of Asian currencies against the greenback varied. The Thai Baht gained 1.6% while the Indian Rupee and Indonesia Rupiah dropped 3.3% and 2.1%, respectively. The Chinese Yuan fluctuated somewhat during the month but recorded just a 0.05% decline against the U.S. dollar by month’s end.

Precious metals prices fell further in August. Gold, platinum and silver prices recorded declines of 1.5%-5.0%, bringing their year-to-date declines to 6.9%-14.4%.image

Economic and Market News

U.S. Keeps Rates on Hold; Argentina Puts Rates at 60%; India, UK, Philippines, Indonesia Raise 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.
  • U.K. Raises Rate by 25 bps – On 2 August, the Bank of England decided to lift its Bank Rate by 25 bps to 0.75%. In the meeting minutes of its Monetary Policy Committee, it stated that “any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent”.
  • Philippines Raises Rate by 50 bps – On 9 August, the Philippines’ central bank raised its policy rate by 50 bps to 4.0%. The bank believes that the series of rate adjustments it has made so far this year will “help reduce further the risks to inflation”, and “bring inflation toward a target-consistent path over the medium term”.
  • Argentina Raises Rate to 60% – On 13 August, the central bank of Argentina raised its benchmark interest rate by 500 bps to 45% and subsequently on 30 August, increased it to 60%.
  • Indonesia Raises Rates by 25 bps – On 15 August, Bank Indonesia lifted its benchmark lending rate by 25 bps to 5.5%.

Chinese Economic Data: Inflation at 2.1% in July; Official PMI at 51.3 in August; Caixin/Markit PMI Dipped to 50.6

  • China’s inflation rate registered at 2.1% in July, up from June’s reading of 1.9%.
  • China’s official PMI reading for August landed at 51.3, slightly higher than July’s reading of 51.2. Meanwhile, the Caixin/Markit PMI for August registered at 50.6, down from July’s reading of 50.8, hitting a 14-month low.

 

About Author Jackie Choy

Jackie Choy  

is the director of ETF Research for Morningstar Investment Management Asia