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Asia ETF Roundup (Market) – May 2019

Pakistan hikes rates; Malaysia, New Zealand and Philippines cut rates.

Jackie Choy, CFA 06/06/19

For the latest ETF industry news, please refer to our “Asia ETF Roundup (Industry) – May 2019”.

Major Markets Performance

Major markets generally declined in the month of May in response to an unexpected twist in the trade talks between the U.S. and China. Meanwhile, U.K. Prime Minister Teresa May announced her resignation, which added some uncertainty over Brexit. The S&P 500 and the FTSE 100 fell 6.6% and 3.5% respectively. In Asia, Japan’s Nikkei 225, Hong Kong’s Hang Seng Index and Singapore’s Straits Times Index retreated 7%-9%. The Chinese onshore and offshore equity markets also fell 7%-10%. Emerging markets’ performance generally followed the broader market into negative territory. India was among the markets least affected. The MSCI India Index was up 0.1%, following the conclusion of the country’s general election.

The U.S. dollar appreciated by 0.3% (as measured by the ICE Spot Index) in May. Meanwhile, Asian currencies generally depreciated further against the greenback in May continuing their negative momentum from April. The Chinese Yuan suffered the greatest depreciation against the U.S. dollar among the Asian currencies in May, depreciating by 2.4%, putting it at the weakest level in six months. The Japanese Yen was an exception, appreciated by 2.6% in May.

Precious metals’ performance was weak in May. Platinum prices dropped significantly, falling 11.0%, followed by silver prices, dropping by 3.4%. Meanwhile, gold prices appreciated by 1.0%.

Economic and Market News

Pakistan Hikes Rates; Malaysia, New Zealand and Philippines Cut Rates

  • Pakistan Hikes Rates by 150bps – The central bank of Pakistan decided on 20 May 2019 to hike its key interest rate by 150bps to 12.25%, the highest level in five years. This was the third rate hike in 2019 and the seventh rate hikes since May 2018.
  • Malaysia Cuts Rates by 25bps – TheBank Negara Malaysia decided on 7 May 2019 to lower its overnight policy rates by 25bps to 3.0%. The bank last adjusted its policy rates in January 2018 and this was the first rate cut since July 2016.
  • New Zealand Cuts Rates by 25bps – The Reserve Bank of New Zealand (RBNZ) decided on 8 May 2019 to cut its key rate by 25bps to 1.5%. According to RBNZ, the slow down of global economic growth and the domestic growth were one of the reasons to lower its rate.
  • Philippines Cuts Rates by 25bps – The central bank of the Philippines decided on 9 May 2019 to cut its overnight reserve repurchase (RRP) rate by 25bps to 4.5%. The bank last adjusted its rates November 2018.

 

China Economic Data: Inflation increased to 2.5% in April; Caixin/Markit PMI stood at 50.2 in May,Official PMI fell to 49.4

  • China’s inflation rate rises to 2.5% for April from March’s reading of 2.3%.
  • China’s Caixin/Markit PMI remained above the 50-point level and stood at 50.2 in May, same level as April. Meanwhile, the official PMI dropped to 49.4 in May from April’s reading of 50.1.

 

About Author Jackie Choy, CFA

Jackie Choy, CFA  

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