Asia ETF Roundup (Market) – August 2019

Negative headlines left global stock markets in the red in the month of August. The trade war between the U.S. and China intensified, Hong Kong protests made global news, and new U.K. prime minister Boris Johnson obtained approval from the Queen to suspend the parliament, setting up the U.K. for a potential no-deal Brexit. Hong Kong’s Hang Seng Index fell 7.4%. In the U.S, the S&P 500 retreated 1.8%. In the U.K. the FTSE 100 dropped 5.0%. Emerging markets’ performance was weak. Many markets recorded losses greater than 5% in August (as measured by their respective MSCI indices in U.S. dollar terms). Brazilian stocks fell sharply, tumbling 9.7%, amid reports of record rates of burning in the Amazon rainforest.

The U.S. dollar appreciated slightly, rising 0.4% (as measured by the ICE Spot Index) in August. A number of central banks in Asia emerging markets cut their rates during the month. Asian currencies generally depreciated against the greenback, though the Japanese Yen was an exception (+2.3% against the U.S. dollar). At the beginning of August, the U.S. Treasury Department designated China as a currency manipulator. The Chinese Yuan fell below 7 against the U.S. dollar, by 3.6% for the month of August.

Precious metals’ prices continued their strong momentum for the third consecutive month. In August, silver prices surged 11.6%, followed by platinum and gold prices, which rose 7.6% and 7.1%, respectively.

Economic and Market News

Hong Kong, New Zealand, India, Thailand, Philippines and Indonesia Cut Rates

• Hong Kong Cuts Rates by 25bps –The Hong Kong Monetary Authority decided on 1 August 2019 to cut its base rate by 25bps to 2.50%, following the U.S. rate cut. This is the first time the Monetary Authority cut interest rates since 2008. The Monetary Authority last raised interest rates in December 2018 by 25bps.
• New Zealand Cuts Rates by 50bsps –The Reserve Bank of New Zealand decided on 7 August 2019 to cut its official cash rate by 50bps to 1.0%. The Bank last cut interest rates in May 2019 by 25bps.
• India Cuts Rates by 35bps – The Reserve Bank of India decided on 7 August 2019 to cut its policy repo rate by 35bps to 5.40%. This is the fourth time the Bank cut interest rates this year. The Bank has cumulatively cut interest rates by 110bps this year.
• Thailand Cuts Rates by 25bps – The Bank of Thailand decided on7August 2019 to cut its policy rate by 25bps to 1.50%. This is the first time the Bank cut interest rates since April 2015. The Bank last raised interest rates in December 2018 by 25bps.
• Philippines Cuts Rates by 25bps – The central bank of Philippines decided on 8 August 2019 to cut its overnight reverse repurchase rate by 25bps to 4.25%. The bank last cut interest rates in May 2019 by 25bps.
• Indonesia Cuts Rates by 25 bps – Bank Indonesia decided on 22 August 2019 to cut BI 7-day (reverse) repo rate by 25bps to 5.50%. This is the second consecutive month that the Bank cut its reverse repo rate.

Singapore Cuts 2019 GDP Growth Forecast to 0-1%

On 13 August 2019, Singapore cut its annual GDP growth forecast to 0-1% from a prior range of 1.5% - 2.5%. The country recorded 0.1% growth in the second quarter on the backdrop of the trade war between U.S. and China. The manufacturing sector experienced a 3.1% year-on-year decline, while the construction and services sectors recorded 2.9% and 1.1% year-on-year growth, respectively. According a report from Channel News Asia, the Monetary Authority of Singapore expressed that it is monitoring the current developments, maintains its policy stance and not considering an off-cycle policy meeting.

China Economic Data: Inflation Rose to 2.8% in July; Caixin/Markit PMI rose to 50.4, Official PMI fell to 49.5 in August

• China’s inflation rate rose slightly to 2.8% for July, compared to June’s reading at 2.7%.
• China’s Caixin/Markit PMI rose pass the 50-point level and registered at 50.4 in August. July’s reading was 49.9. The official PMI also 49.5 to in August, down from July’s of 49.7.