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Asia ETF Roundup (Market) – July 2017

The U.S. Federal Reserve keeps rates on hold and hints it will implement a balance sheet normalisation programme “relatively soon”; Hong Kong RQFII quota expanded to Rmb 500 billion.

Jackie Choy 03/08/17

For the latest ETF industry news, please refer to our “Asia ETF Roundup (Industry) – July 2017”.                                                                                                                            

Major Markets Performance
Most major global markets ended the month of July with gains. Hong Kong’s Hang Seng Index rose 6.1% in July. The share price of Tencent, one of the HSI's largest constituents, notched new all-time highs during month. Stocks in Singapore also rallied, climbing 3.2% during the month. China’s equity markets also advanced 2-4% (HSCEI +4.5%; CSI 300 +1.9%; Shanghai Composite +1.9%). The monthly performance of emerging- and frontier-markets was mostly positive. The Brazilian stock market rocketed 10.8% in July, while shares in India rose 7.4% (measured by the respective MSCI indices in USD terms).

The ICE USD Spot Index fell another 2.9% in July, putting its year-to-date decline at 9.1%. The Euro’s momentum from the two prior months carried over into July as it gained another 3.4% against the U.S. dollar. On a year-to-date basis, the Euro has gained 11.8% versus the greenback. Asian currencies’ performance against the U.S. dollar were generally favorable in July. The Korean Won appreciated 2.2% against the U.S. dollar. The Chinese yuan continued its rally against the U.S. dollar, appreciating by 0.8%, which puts its year-to-date gain at 3.3%.

Precious metals’ prices rebounded in July. Gold, silver and platinum prices rose around 2%.

Economic and Market News

U.S. Federal Reserve Keeps Rates on Hold; Will Implement Balance Sheet Normalisation Programme “Relatively Soon”; Vietnam Cut Rates by 25bps

  • U.S. Keep Rates on Hold - On 26 July 2017, the U.S. Federal Reserve announced it would keep the Federal Funds rate on hold at 1.0%-1.25%. The FOMC statement stated that “The Committee expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated.”
  • Vietnam Cuts Rates by 25bps – On 10 July 2017, the central bank of Vietnam cut several rates by 25bps, hoping to “contribute to managing inflation, stabilizing macro economy, and supporting for business and economic growth”.

 

 

Expansion of Hong Kong’s RQFII Quota
The People’s Bank of China (PBoC) announced on 4 July that the State Council has approved the increase of Hong Kong’s Renminbi Qualified Foreign Institutional Investor (RQFII) quota from Rmb 270 billion to Rmb 500 billion.

The latest total quota for the RQFII scheme stands at Rmb 1.74 trillion at the regional level with Hong Kong owning the highest quota among the 18 regions, followed by the US with Rmb 250 billion.

Chinese Economic Data: China 2017 2Q GDP Growth at 6.9%; Inflation Stays at 1.5% in June; Caixin/Markit PMI Rises to 51.1, Official PMI Registers at 51.4

  • China achieved 2017 2Q GDP growth of 6.9%. This is the same rate as that for 1Q 2017. Recall that the Chinese government set a GDP growth target for 2017 of “around 6.5%”.
  • China’s inflation rate remained at the same level as the previous month, registering at 1.5% in June.
  • China’s official PMI reading for July 2017 registered at 51.4. This compares to June's reading of 51.7. Meanwhile, the Caixin/Markit Purchasing Managers' Index rose to 51.1 in July, higher than June's 50.4.

 

 

About Author Jackie Choy

Jackie Choy  

Jackie Choy is the director of ETF Research for Morningstar Investment Management Asia, overseeing Morningstar’s ETF research activities in Asia.