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Asia ETF Roundup (Market) – June 2019

U.S. keeps rates on hold; Australia, India and Russia cut rates

Jackie Choy, CFA 03/07/19

For the latest ETF industry news, please refer to our “Asia ETF Roundup (Industry) – June 2019”.

Major Markets Performance

During the month, markets speculated whether the U.S. would cut rates later in the year. Stock markets seemed to think that there are good odds a rate cut is in the cards as the S&P 500 notched a new record high during the month, closing the month up 6.9%. The UK’s FTSE 100, Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index rose 3%-6%. Tensions over U.S.-China trade talks also showed some signs of easing during the month. The Chinese equity markets rebounded some 3%-5%. Emerging markets’ performance generally followed the broader markets’ rebound with the exception of Pakistan. The Pakistani government announced a budget during the month aimed at securing a US$6 billion bailout package from the IMF that was preliminarily agreed upon in May.

The U.S. dollar depreciated by 1.7% (as measured by the ICE Spot Index) in June. Meanwhile, Asian currencies appreciated against the greenback. The Korean Won and the Thai baht saw some of the strongest performance among the Asian currencies for the month, appreciating around 3% against the greenback. The Chinese Yuan rebounded slightly by 0.5% against the U.S. dollar, after a 2.4% decline in May.

Precious metals’ prices rallied in June. Gold appreciated 8.8%. Silver and platinum rose 5.1% and 3.4%, respectively.

Economic and Market News

U.S. Keeps Rates on Hold; Australia, India and Russia Cuts Rates
U.S. Keeps Rates at 2.5% - The Federal Reserve decided on 19 June 2019 to keep its key interest rate level on hold at 2.25% to 2.5%. The Fed stated that “in light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion.” The next FOMC meeting will be held on 30 and 31 July 2019.
Australia Cuts Rates by 25bps – The Reserve Bank of Australia decided on 4 June 2019 to cut its key interest rate by 25bps to 1.25%. It was the first rate cut since September 2016. The Bank stated that the rate cut was “to support employment growth and provide greater confidence that inflation will be consistent with the medium-term target.”
India Cuts Rates by 25bps – The Reserve Bank of India decided on 6 June 2019 to cut its key interest rates by 25bps to 5.75%, putting rates at the lowest level since late 2010. This was the third rate cut this year.
Russia Cuts Rates by 25bps – The central bank of Russia decided on 14 June 2019 to cut its key interest rate by 25bps to 7.5%. The Bank stated that “we hold open the possibility of a further rate cut at one of the upcoming Board meetings.”

China Economic Data: Inflation Increased to 2.7% in May; Caixin/Markit PMI Fell to 49.4 in June, Official PMI Stood at 49.4
• China’s inflation rate rose to 2.7% for May from April’s reading of 2.5%.
• China’s Caixin/Markit PMI fell below the 50-point level and registered at 49.4 in June. May’s reading was 50.2. Meanwhile, the official PMI dropped to stood at 49.4 in June from May’s reading of 49.4. even with its May reading.

 

About Author Jackie Choy, CFA

Jackie Choy, CFA  

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