Asia ETF Roundup (Market) – April 2015

Chinese equity markets remained strong is April, as the major indices rose 17-19% (CSI 300 +17%; Shanghai Composite +19%; HSCEI + 17%), putting the onshore Chinese equities indices up by some 35% thus far this year. Other global developed markets were generally up 1-3%. Performance of the Emerging/Frontier markets was mixed. Brazil performed strongly, rising 16% while Pakistan was up 11%. Meanwhile, Indonesian stocks dropped 10%. (As measured by the MSCI indices covering these markets, expressed in USD terms).

The U.S. dollar weakened further in April having lost some momentum lost after U.S. Fed’s March FOMC statement (ICE USD Spot -4%). Many currencies appreciated against the U.S. dollar with the Singapore dollar, the Euro, the Korea Won and the Malaysian Ringgit rose 3-4%. The Renminbi was largely unchanged against the U.S. dollar.

Precious metals’ performance in April was mixed, with gold and silver prices dropped 0.5-0.6% while platinum rose 0.6%.

Economic and Market News

China Lowers RRR; Thailand and Russia Cut Rates; Brazil Hikes Rates

• US Fed Statement (April 2015) – In its statement coming out of its April FOMC meeting, the Fed cited that “economic growth slowed during the winter months, in part reflecting transitory factors”. The timing of any future interest rate hike remained the key question for the market.
• China Lowers RRR - On 20 April 2015, the People's Bank of China (PBoC) lowered the reserve requirement ratio (RRR) by 100bps to 18.5%. The PBoC last cut RRR in February 2015 by 50bps. This move effectively injects liquidity (some Rmb 1.2 trillion, according to the SCMP) into the banking system.
• Thailand Cuts Rates by 25bps – On 29 April 2015, the Bank of Thailand cut its policy rate by 25bps to 1.5%. This is the second consecutive month the Bank cut its policy rate.
• Russia Cuts Rates by 150bps – On 30 April 2015, the Central Bank of Russia cut key rates by 150bps to 12.5%. It had previously lowered key rates by 100bps in March 2015 and by 200bps in January 2015.
• Brazil Hikes Rates by 50bps – On 29 April 2015, the Central Bank of Brazil hiked base rates by 50bps to 13.25%. It had previously hiked rates in March and January 2015 and December 2014 (by 50bps each time).

Chinese Economic Data: Q1 GDP Growth at 7.0%, Inflation Holds at 1.4% in March; HSBC/Market PMI at 48.9 in April; Official PMI at 50.1

• China’s Q1 GDP growth registered at 7.0%, the slowest pace in six years, though this is in-line with the government’s full year target of “around 7%”.
• China’s inflation rate held at 1.4% in March, level with February’s reading.          
• Official April PMI registered at 50.1, identical to the reading in March. Meanwhile, the HSBC/Markit Purchasing Managers' Index retreated further in April, landing at 48.9, marking a one-year low, and down from March’s 49.6. 

Jackie Choy, CFA, is an ETF Strategist with Morningstar