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Asia ETF Roundup (Market) – March 2020

Markets tumble, central banks fire bazookas.

Jackie Choy, CFA 08/04/20

For the latest ETF industry news, please refer to our “Asia ETF Roundup (Industry) – March 2020”.

Major Markets Performance

On 12 March, the World Health Organization announced the COVID-19 outbreak had officially become a pandemic. Large portions of the global economy have gone into lockdown. Markets have been roiled. The S&P 500 ended the month with a loss of 12.5%. Key Asian markets also suffered double digit losses (Korea’s KOSPI -11.7%, Singapore’s STI -17.6%). China’s equity markets saw narrower losses at around 5-7% (HSCEI -6.9%; CSI 300 -6.4%; Shanghai Composite -4.5%). Emerging markets were particularly hard hit. Many tanked 20-40% (proxied by the respective MSCI country indices in USD terms), putting the year-to-date declines in some of the markets at 30-50%.

The U.S. dollar appreciated in March, rising 0.9% (as measured by the ICE Spot Index). Asian currencies generally depreciated against the greenback, with the Indonesia Rupiah depreciating 12.0%. The Chinese Yuan slipped 1.5% against the U.S. dollar, putting its year-to-date depreciation at 1.8%.

Precious metals’ prices generally followed the broader market downward. Silver and platinum prices dropped 18.9% and 16.5%, respectively. Gold price also saw large volatility during the month but ended the month of March largely unchanged. Oil prices took a big hit during the month. WTI Crude Oil Futures prices were down 56.5%, by month end, landing at USD 20.5 per barrel.

Economic and Market News

Central Banks Brandish Their Bazookas

  • The U.S. Fed made two emergency rate cuts during the month. On 3 March it cut the Federal Funds Rate funds rate by 50bps. It lopped off another 100bps from its target rate on 15 March. These rate cuts put the Fed’s target range at 0% to 0.25%.
  • The Fed also announced it plans to buy corporate bonds and corporate bond ETFs.
  • In addition, the U.S. government launched a USD 2 trillion stimulus package.
  • Other central banks around the world also cut rates during the month. These include: Australia (-25bps, twice), Brazil (-50bps), Canada (-50bps, three times), Hong Kong (-50bps and -64bps), India (-75bps), Indonesia (-25bps), Malaysia (-25bps), Pakistan (-150bps), the Philippines (-50bps), Saudi Arabia (-75bps), South Korea (-50bps), Taiwan (-25bps), Thailand (-25bps), Vietnam (-100bps), UAE (-75bps), U.K. (-50bps and -15bps), and Vietnam (-100bps).

China Economic Data: Inflation Climbs to 5.2% in February; Caixin/Markit PMI and Official PMI Rebounded to Above 50

  • China’s inflation rate remained high amid the COVID-19 outbreak, registering at 5.2% in February. This was slightly lower than January’s reading of 5.4%. Pork prices surged further, jumping 135% from a year ago, up from January’s reading of 116%.
  • China’s Caixin/Markit PMI rebounded in March to 50.1 from February’s low of 40.3. The official PMI also rebounded to above 50, to 51.0 from February’s record-low of 35.7.
About Author Jackie Choy, CFA

Jackie Choy, CFA  

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