Asia ETF Roundup (Market) – May 2020

The U.S. dollar depreciated in May, slipping 0.7% (as measured by the ICE Spot Index). Asian currencies generally depreciated against the greenback. The Korea Won and the Japanese Yen depreciated 1.6% and 0.7%, respectively. The Chinese Yuan depreciated 1.3% against the U.S. dollar, putting its year-to-date performance at -2.5%. Meanwhile, precious metals’ prices rose for another month. Silver prices jumped 14.7%. The prices of platinum and gold increased 7.6% and 1.5%, respectively.

Economic and Market News

Rate cuts in Malaysia, Brazil, Vietnam, Pakistan, Thailand and India

• Malaysia Cut Rates by 50bps – On 5 May, the central bank of the Malaysia decided to cut the Overnight Policy Rate (OPR) by 50 bps to 2.00%. The bank has cut rates by 100bps in total this year. It last cut rates by 25bps in March.
• Brazil Cut Rates by 75bps – On 7 May, the Central Bank of Brazil decided to lower the Selic rate by 75bps to 3.00%. The bank has cut rates by 150bps in total this year.
• Vietnam Cut Rates by 50bps – On 13 May, the State Bank of Vietnam decided to cut the refinancing rate by 50bps to 4.50%.  
• Pakistan Cut Rates by 100bps - On 15 May, the State Bank of Pakistan decided to cut policy rate by 100bps to 8.00%. The bank has cut rates by 525bps in total this year.
• Thailand Cut Rates by 25bps – On 20 May, the Bank of Thailand decided to cut the policy rate by 25bps to 0.50%. The bank has cut rate by 75bps in total this year.
• India Cuts Rates by 40bps – On 22 May, the Bank of India decided to cut its policy repo rate by 40bps to 4.00%. The bank has cut rates by 115bps in total this year. The bank cited that it will “continue with the accommodative stance as long as it is necessary to revive growth and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target.”
  
  

Further Simplification of QFII and RQFII Schemes

Recall that in September 2019, the State Administration of Foreign Exchange (SAFE) announced it would remove the quota limits of the QFII and RQFII schemes. On 7 May, the People’s Bank of China and the State Administration of Foreign Exchange jointly announced they would further simplify the schemes. In addition to removing the investment quota of QFII and RQFII, qualified investors will no longer need to apply for any investment quota and instead only need to register with the SAFE. Qualified investors may also choose currencies and the timing of the inward remittance.

China Economic Data: Inflation Slows to 3.3% in April; Caixin/Markit PMI and Official PMI Both Above 50

• China’s inflation slowed further in April as the consumer price index rose 3.3%, versus March’s reading of 4.3%. Slower growth in food prices was a key contributor to milder overall inflation.
• China’s Caixin/Markit PMI rose to above 50 in May, registering at 50.7. This compares to April’s reading of 49.4. The official PMI in May remained above 50, registering at 50.6, slightly below April’s reading of 50.8.