For industry news relating to Asian ETFs, please refer to our “Asia ETF Roundup (Industry) – March 2013”.
Major Markets Performance
The eurozone debt crisis continued to grab headlines, albeit for different reasons as the island nation of Cyprus found itself the crisis’ latest victim. Meanwhile, military tensions between North and South Korea intensified, with North Korea declaring the 1953 armistice agreement invalid and announcing it is in a “state of war”. Despite the backdrop of the Cypriot crisis, the US and UK markets were up for the month. On the other hand, Asian markets were generally in the negative territory. The Chinese domestic A-Share markets dropped over 5% in March.
Most major currencies dropped as the US dollar rebounded. Commodities delivered mixed performance, with gold rebounding by 0.6% while platinum and silver dropped 1%. .png)
Economic and Market News
“Bazookas” – More to Come?
· Bank of Japan will do “whatever it takes” to hit its inflation target – The new governor of the Bank of Japan (BOJ), came on board in March and, at a conference, expressed his ambition to push up inflation to the BOJ’s target of 2% within two years by buying a larger and wider range of assets. This raised the market’s expectation on the BOJ turning its asset-purchase plan to an open-ended one at an earlier time.
· India cuts rates by 25bps - On 19 March 2013, the Reserve Bank of India (RBI) lowered benchmark rates by 25bps to 7.5%. The RBI last lowered rates in January 2013. The RBI cited that “Even as the policy stance emphasizes addressing the growth risks, the headroom for further monetary easing remains quite limited”.
Chinese Economic Data: February Inflation Rose; March PMI at 50.9
· Chinese inflation hit a 10-month high in February at 3.2%. This compares to a reading of 2.0% in January. Food prices were a key driver of the uptick, and were up by 6% in February. Note that the Chinese New Year fell in February this year as compared to January last year, making the year-on-year changes for January and February less comparable.
· Official March PMI registered at 50.9, up from February’s 50.1. The official PMI figure has been hovering above the 50 level (“expansion” territory) for the past 6 months.
Italy’s Credit Rating Downgraded by Fitch, from A- to BBB+
On 8 March 2013, Fitch Ratings downgraded Italy’s credit rating by one notch from A- to BBB+ and reaffirmed its “Negative” outlook. Fitch cited the inconclusive results of the Italian parliamentary elections and current recession as the main reasons for the downgrade.
Jackie Choy, CFA, is an ETF Strategist with Morningstar
