Asia ETF Roundup (Market)–October 2021

Major Markets Performance

On 14 October, U.S. President Biden signed legislation which temporarily raised the government's borrowing ceiling by USD 480 billion until early December. In China, Evergrande (03333; listed in Hong Kong) avoided default during the month by paying overdue coupon payments. Stock markets breathed a sigh of relief. The Morningstar Global Markets, Developed Markets, US Market and Europe indexes increased anywhere from 4-6% during the month. The major U.S. market indexes--the S&P 500, Nasdaq and the Dow Jones Industrial Average-- notched new highs during the month. Emerging markets stocks also gained 1% in October. Equity markets in Philippines, Indonesia, Malaysia, and Russia jumped between 3-7%, while Brazil’s stock market slipped 10.0% in the month. Chinese stocks’ climbed 2.9% (proxied by their respective Morningstar indexes in U.S.-dollar terms).

The U.S. dollar slipped 0.1% (as measured by the ICE Spot Index) in October. Major Asian currencies appreciated against the greenback. The Thai Baht, Indian Rupee, Korean Won, and Philippine Peso appreciated around 1%-2%, while the Yen depreciated 2.1%. The Chinese Yuan appreciated around 1% against the U.S. dollar, and extended its year-to-date gain to 2.2%.

Precious metals prices pushed higher in October. The prices of platinum and gold increased around 1%-4% while the price of sliver increased 11.5% during the month.

Economic and Market News

Rate Hikes in New Zealand, Russia, and Brazil; Canada Ends Quantitative Easing

• New Zealand Hikes Rates by 25bps – TheReserve Bank of New Zealand raised its key interest rate by 25bps to 0.50% on 6 October. This marked the bank’s first rate hike since July 2014. The Bank stated that “The Committee noted that further removal of monetary policy stimulus is expected over time, with future moves contingent on the medium-term outlook for inflation and employment.”
• Russia Hikes Rates by 75bps – Bank of Russia raised its key interest rate by 75 basis points to 7.50% on 22 October. This was the sixth rate hike this year. The bank has collectively added 325bps to its key interest rate for the year-to-date. The Bank stated that “If the situation develops in line with the baseline forecast, the Bank of Russia holds open the prospect of further key rate rises at its upcoming meetings.”
• Brazil Hikes Rates by 150bps – Central Bank of Brazil raised its key interest rate by 150bps to 7.75% on 27 October. Brazil’s central bank has raised rates six times this year, collectively adding 575bps to its key interest rate. The Bank stated that “For the next meeting, the Committee foresees another adjustment of the same magnitude.”
• Canada Ends Quantitative Easing – On 27 October, the Bank of Canada announced the decision to end quantitative easing and to move into the reinvestment phase. The Bank will maintain roughly constant holdings of Canada government bonds going forward.

Meituan Fined RMB 3.4 billion for Anti-competitive Behavior

On 8 October, State Administration for Market Regulation (SAMR) fined Meituan (03690), a Chinese food delivery group, RMB 3.4 billion for its anti-competitive behaviors including signing exclusive cooperation agreements with merchants and making use of data or algorithms to prohibit merchants from using other platforms. The fine accounted for 3% of Meituan’s 2020 domestic revenue. The announcement can be found here (Chinese only).

China’s Cross-Border Online Brokers Under Scrutiny

A senior official of the People’s Bank of China, China’s central bank, published an article (Chinese only) on the website of the Finance 40 Forum which stated, without naming specific company names, that some cross-border online brokers not licensed in China are operating illegally if they serve Chinese investors through these online platforms. The share prices of some Chinese online brokers listed in the U.S. plummeted on the back of this news.

China Economic Data: GDP Growth at 4.9% in Q3, Inflation at 0.7%; Caixin/Markit PMI Rose to 50.6; Official PMI Slipped to 49.2

• China’s third-quarter 2021 GDP grew 4.9% YoY. This compares to 7.9% year-on-year growth in the previous quarter.
• CPI eased slightly to 0.7% in September from 0.8% in August. Food prices were the key contributor, dropping 5.2% YoY. In particular, pork prices fell 46.9% YoY.
• In October, the Caixin/Markit PMI rose further to 50.6, from August’s reading of 50.0. Meanwhile, the official PMI continued to contract, falling to 49.2 from September reading of 49.6.