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Asia ETF Roundup (Market) – February 2020

China manufacturing PMIs at record low; EM markets cut rates

Jackie Choy, CFA 05/03/20

For the latest ETF industry news, please refer to our “Asia ETF Roundup (Industry) – February 2020”.

Major Markets Performance

As fears surrounding the COVID-19 outbreak have spread across the globe, major markets have been in turmoil.  The S&P 500 had notched new highs during the month before nosediving at month end. The index finished the month with an 8.4% loss. Japan’s Nikkei 225 and Korea’s KOSPI fell 8.9% and 6.2%, respectively, as the outbreak worsened in those countries. China onshore markets, on the other hand, saw relatively small losses for the month (CSI 300 -1.6%; Shanghai Composite -3.2%) after trading resumed on 3 February following an extended Chinese New Year Holiday. Emerging markets generally recorded hefty losses, ranging from 6% to 13%.

The U.S. dollar appreciated in February, rising 0.8% (as measured by the ICE Spot Index). Asian currencies generally depreciated against the greenback. The Chinese Yuan slipped 0.9% against the U.S. dollar.

Precious metals’ prices had a strong run through most of February before losing steam. Gold closed the month with a 1.6% gain while platinum and silver prices dropped 9.2% and 3.9%, respectively.

Economic and Market News

EM Markets Rate Cuts: Thailand, Brazil, Philippines, Russia, China, Indonesia

  • Thailand Cuts Rates by 25bps – On 5 February, the Bank of Thailand decided to cut its policy rate by 25bps to a record low of 1.0%. The Bank last cut rates by 25bps in November 2019.
  • Brazil Cuts Rates by 25bps - On 5 February, the Central Bank of Brazil decided to cut its benchmark interest rate by 25bps to a record low of 4.25%. The Bank last cut rates by 50bps in December 2019.
  • Philippines Cuts Rates by 25bps
  •  – On 6 February, the Philippines central bank decided to cut its overnight interest rates by 25bps to 3.75%. The Bank last cut rates by 25bps in September 2019.
  • Russia Cuts Rates by 25bps – On 6 February, the Russia central bank decided to cut its key rate by 25bps to 6.0%. The bank last cut rates by 25bps in December 2019.
  • China Cuts Rates by 10bps – On 20 February, the People’s Bank of China decided to cut the one-year loan prime rate by 10bps to 4.05%. The PBOC last cut its benchmark rates by 5bps in November 2019.
  • Indonesia Cuts Rates by 25bps – On 20 February, the central bank of Indonesia decided to cut its BI 7-day reverse repo rate by 25bps to 4.0%.

China Economic Data: Inflation Climbs to 5.4% in January; Caixin/Markit PMI and Official PMI Both Plunged to Record Low

  • China’s inflation rate increased further to 5.4% in January, up from a reading of 4.5% in December 2019. Food prices alone jumped 4.4% month-on-month. Surging pork prices remain a key contributor, spiking 116% higher as compared to a year ago.
  • China’s Caixin/Markit PMI fell to a record low of 40.3 in February. January’s reading was 51.1. Meanwhile, the official PMI plunged to a record-low at 35.7 in February 2020. The January reading was 50.0. The previous low was recorded in November 2008 at 38.8.
About Author Jackie Choy, CFA

Jackie Choy, CFA  

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