Asia ETF Roundup (Market) – July 2021

Many developed equity markets brushed off concerns over the highly transmissible COVID-19 delta variant and marched higher during July. The Morningstar Developed Markets Index gained 1.5% for the month. The S&P 500 and Nasdaq notched new all-time highs towards the end of the month, and the Morningstar US Market Index rose 1.9%.

The U.S. dollar appreciated 2.5% (as measured by the ICE Spot Index) in July. Asian currencies generally depreciated against the greenback. The Malaysian Ringgit, Philippine Peso and Baht fell around 2%. The Chinese Yuan was little changed against the U.S. dollar for the month, putting its year-to-date gain at 1.3%.

Precious metals’ performance was mixed in July. The price of Platinum and Silver fell another 1.4% and 1.1%, respectively. On the other hand, the price of gold rebounded 3.6% in July.

Economic and Market News

China Cut RRR; Rate Hikes in Russia

• China Cuts RRR by 50 bps - On 9 July, The People’s Bank of China (PBOC) announced it was reducing the required reserve ratio (RRR) by 50bps from 15 July. This put the weighted average RRR for financial institutions in China at 8.9%. The PBOC expected the cut would release around RMB 1 trillion (US$154 billion) in long-term liquidity to the economy.
• Russia Hikes Rates by 100bps – The Bank of Russia raised its key interest rate by 100bps to 6.50% on 23 July. This is the fourth rate hike this year, which have collectively added 225bps to its key interest rate. The Bank stated that “the Bank of Russia will consider the necessity of further key rate increase at its upcoming meetings.”

China Economic Data: GDP Growth at 7.9% in Q2, 12.7% in H1; Inflation at 1.1%; Both Caixin/Markit PMI and Official PMI Expand at Slower Pace

• China posted second quarter GDP growth of 7.9% YoY. This is compared to the 18.3% GDP growth in Q1. Cumulatively, GDP grew by 12.7% YoY in the first half of 2021.
• CPI inflation dropped to 1.1% in June from 1.3% in May.
• In July, both the Caixin/Markit PMI and the official PMI continued to fall. The Caixin/Markit PMI fell to 50.3, a 15-month low, from June’s reading of 51.3. The official PMI also fell to 50.4 from June’s reading of 50.9.

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