Asia ETF Roundup (Market) – August 2021

Major Markets Performance

In August, the U.S. and other developed markets continued to gain ground. The Morningstar Developed Markets Index gained 2.5%, while the Morningstar US Market and Europe indices rose 2.9% and 1.9%, respectively. Both S&P 500 and the Nasdaq indices made new record highs towards the end of the month. Asian equity markets’ performance was mixed. Stock markets in Japan and Taiwan rose around 3% while China gained a modest 0.4%. The equity markets in Korea and Singapore dropped 1%-2%. A number of emerging equity markets experienced strong performance. The equity markets in Thailand, the Philippines, Malaysia and India saw gains ranging from 7% to 11% (proxied by their respective Morningstar indexes in U.S.-dollar terms).

The U.S. dollar appreciated 0.5% (as measured by the ICE Spot Index) in August. Asian currencies generally appreciated against the greenback. The Indian Rupee and Thai Baht appreciated around 2%. The Chinese Yuan depreciated slightly by 0.1% against the U.S. dollar for the month, putting its year-to-date gain at 1.2%.

Precious metals’ performance was weak in August. The prices of Platinum and Silver dropped 4%-6% while gold prices slipped 0.6% in the month.

Economic and Market News

Rate Hikes in Brazil and Korea; U.S. Fed Tapering Near?

• Brazil Hikes Rates by 100bps – Central Bank of Brazil raised its key interest rate by 100bps to 5.25% on 4 August. This marked the bank’s fourth rate hike this year, collectively adding 325bps to its key interest rate. The Bank stated that “For the next meeting, the Committee foresees another adjustment of the same magnitude.”
• Korea Hikes Rates by 25bps – Bank of Korea raised its key interest rate by 25 basis points to 0.75% on 26 August. This marked the bank’s first rate hike since November 2018. The Bank stated that “The Board will continue to conduct monetary policy in order to sustain the recovery of economic growth and stabilize consumer price inflation at the target level over a medium-term horizon, while paying attention to financial stability.”
• U.S. Fed FOMC Minutes – On 18 August, the U.S. Fed published the FOMC minutes for its 27-28 July meeting, which stated that “Looking ahead, most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year because they saw the Committee’s ‘substantial further progress’ criterion as satisfied with respect to the price-stability goal and as close to being satisfied with respect to the maximum employment goal.”

China to Set Up New Stock Exchange in Beijing to Serve Innovation-oriented SMEs

On 2 September, President Xi Jinping announced that China would establish a new stock exchange in Beijing to serve innovation-oriented SMEs at his opening speech at the China International Fair for Trade in Services (CIFTIS). The minutes of his speech can be found here (Chinese only).  

• On 2 September, China Securities Regulatory Commission (CSRC) stated that as compared to the Shanghai stock exchange and Shenzhen stock exchange the new stock exchange will play a different position in China financial market. The new exchange will connect China’s multi-level financial market and facilitate a direct financing channel for innovative SMEs. The announcement can be found here (Chinese only).

China Limits Under-18s’ Online Gaming to Three Hours Per Week

On 30 August, National Press and Publication Administration (NPPA) announced that under-18s’ online gaming would be limited to three hours a week. Online gaming companies are only permitted to offer online gaming service to under 18s from 8:00 pm to 9:00 pm on Fridays, Saturdays, Sundays and public holidays. The regulation became effective from 1 September. The announcement can be found here (Chinese only).

China Drafted Regulations Banning Unfair Competition in the Internet Sector

On 17 August State Administration for Market Regulation (SAMR) announced the draft of regulation aimed at eliminating unfair competition in the internet sector. Marketing activities such as incentives to induce positive ratings and fake reviews are banned in the draft. Companies will not be allowed to use users’ data or algorithms to affect their choices. The draft is open to public feedback till 15 September. The draft regulation can be found here (Chinese only).

President Xi Jinping Emphasized Common Prosperity

On 17 August, President Xi Jinping emphasized common prosperity at the tenth meeting of the Central Committee for Financial and Economic Affairs. The meeting called for developing systems to facilitate peoples’ wellbeing and guarantee their basic needs. The meeting also underlined efforts to increase the size of the middle-income class and the income for the low-income class. The meeting notes can be found here.

• On 19 August, Tencent (00700) announced a RMB 50 billion investment plan to promote common prosperity. The investment will be used for rural revitalization, education development, improving medical system and increasing income of low-income group. The announcement can be found here (Chinese only) on Tencent’s official social media account.
• On 24 August, Pinduoduo (PDD) launched “10 Billion Agriculture Initiative” to support agricultural modernization and rural vitalization. The initiative plan is not driven by commercial goal but aimed to motivate agricultural talents and improve the agriculture technology. The announcement can be found here.  
• On 2 September, Alibaba (BABA, 09898) confirmed to invest RMB 100 billion in supporting common prosperity by 2025. The investment will focus on technological innovation, employment, economy development, disadvantage caring and common prosperity development fund. The announcement can be found here (Chinese only).  

Inflation at 1.0%; Official PMI Expand at Slower Pace; Caixin/Markit PMI Experienced First Contraction Since April 2020.

• CPI dropped to 1.0% in July from 1.1% in June.
• In August, both the Caixin/Markit PMI and the official PMI continued to fall. The Caixin/Markit PMI dropped to 49.2, from July’s reading of 50.3. This marked the first contraction since April 2020. The official PMI also fell to 50.1 from July’s reading of 50.4.

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