Asia ETF Roundup (Market) – March 2022

U.S. hikes rates by 25bps; BOJ performed yield curve control.

Jackie Choy, CFA 08 April, 2022 | 11:11
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For the latest ETF industry news, please refer to our “Asia ETF Roundup (Industry) – March 2022”.

 

Major Markets Performance

Russia’s invasion of Ukraine dominated the headlines in March. Meanwhile, North Korea carried out a number of missile-tests during the month, including its largest intercontinental ballistic missile. Stock markets stumbled early in the month, but many regained their footing. The Morningstar Global Markets Index rose 2.1% for the month. On the other hand, the Morningstar China Index plunged sharply, as the U.S. Securities and Exchange Commission identified a list of Chinese companies with U.S.-listed ADRs subject to the Holding Foreign Companies Accountable Act (“HFCAA”). This sparked concerns that these ADRs may be delisted. While it rallied off its mid-month lows, the Morningstar China Index still lost 7.7% for the month.

On 16 March, the U.S. Federal Reserve announced its first rate hike since December 2018. The target range for the federal funds rate was raised by 25bps, putting the target range to 0.25%-0.50%. The ICE USD Spot rate rose 1.6% in March. On the other hand, the Bank of Japan reaffirmed its stance in its quantitative and qualitative monetary easing with yield curve control by offering to purchase an unlimited amount of 10-year government bonds at 0.25% near the end of the month. The Japanese Yen depreciated sharply against the greenback, falling 5.1% in March.

Precious metals’ performance was mixed in March. Platinum prices plunged 7.5% while the prices of gold and silver rose around 2%.

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Economic and Market News

U.S., U.K. Hike Rates by 0.25%; BOJ Announces Unlimited Bond Purchases

  • U.S. Raises Rates by 25 bps – On 16 March, the U.S. Federal Reserve decided to raise the target range for the federal funds rate by 25bps, putting the target range at 0.25%-0.50%. The FOMC statement also commented that “the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting.”
  • U.K. Hikes Rates by 25bps – On 17 March, the Bank of England hiked rates by 25bps, putting its Bank Rate at 0.75%. This is the second rate hike made by the Bank of England this year.  
  • Bank of Japan’s Unlimited Bond Purchases –On 28 March, the Bank of Japan offered to purchase an unlimited amount of 10-year government bonds at 0.25% in effort to control its yield curve. The BOJ last intervened in the market in February 2022.

 

China Economic Data: Inflation at 0.9% in February; Caixin/Markit PMI and Official PMI Fell in March

  • Inflation registered at 0.9% in February, unchanged from January.
  • China’s Caixin/Markit PMI fell sharply to 48.1 in March, from the reading of 50.4 in February. The official PMI also fell below the 50-mark, to 49.5 from 50.2 in February.

 

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About Author

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

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