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Asia ETF Roundup (Market) – October 2018

Markets tumbled; China Q3 GDP growth at 6.5%.

Jackie Choy, CFA 08/11/18

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

Major Markets Performance

The “October Effect” was all too real this year. The S&P 500 retreated 6.9% while the Chinese onshore/offshore markets tumbled around 8%. Other major Asian benchmarks, such as Hong Kong’s Hang Seng Index, Japan’s Nikkei 225 and Korea’s KOSPI dropped 9%-13%. Emerging- and frontier-markets generally saw similar declines. The exception among emerging markets was Brazil. The MSCI Brazil Index rose 17.8% in USD terms in response to the conclusion of the country’s presidential election.

The U.S. dollar gained 2.1% in October (as measured by the ICE Spot Index). Asian currencies generally depreciated against the dollar. The Korean Won, Thai Baht, Indian Rupee and the Indonesia Rupiah saw even greater depreciation versus the dollar, ranging from 2%-3%. The Chinese Yuan slipped 1.3% against the greenback, putting its year-to-date depreciation at 6.6%.

Precious metals’ performance was a bright spot in October. Gold and platinum prices rose 2.3%, while the price of silver rose 0.2%.


Economic and Market News

China Reduces Reserve Requirement Ratio by 100 bps

On 7 October, the People’s Bank of China announced it had cut reserve requirement ratio (RRR) for some banks (large commercial banks, joint-stock commercial banks, city commercial banks, non-county-level rural commercial banks and foreign banks) by 100 bps, effective on 15 October. According to the PBoC, the RRR cut would release Rmb 1.2 trillion of liquidity into the banking system, of which Rmb 450 billion would be used to offset maturing medium-term lending facility (MLF) loans. This is the fourth RRR cut by the PBoC this year.

Chinese Economic Data: GDP Growth at 6.5% in Q3; Inflationat 2.5% in September; Official PMI Fell to 50.2 in October; Caixin/Markit PMI at 50.1

  • China recorded 6.5% GDP growth during the third quarter, meeting the country’s 2018 growth target of “around 6.5%”, despite falling from 6.8% in the first quarter and 6.7% in the second quarter.
  • China’s inflation rate registered at 2.5% in September, up from August’s reading of 2.3%.
  • China’s official PMI reading for October fell to 50.2, compared to September’s reading of 50.8. Meanwhile, the Caixin/Markit PMI for October registered at 50.1, slightly higher than September’s reading of 50.0.
About Author Jackie Choy, CFA

Jackie Choy, CFA  

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