Asia ETF Roundup (Market) – August 2022

Hawkish remark from U.S. Fed Chair; PBoC cut rates by 5bps

Jackie Choy, CFA 08 September, 2022 | 10:35
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For the latest ETF industry news, please refer to our “Asia ETF Roundup (Industry) – August 2022”.

Major Markets Performance

In early August, U.S. House Speaker Nancy Pelosi visited Taiwan. Subsequent to Pelosi’s visit, China conducted military drills around Taiwan. Meanwhile, global central banks continued to hike rates in August. On 26 August, U.S. Fed Chair Powell made a speech at the Jackson Hole Conference where he reiterated a hawkish stance by stating that “we must keep at it until the job is done”. Bucking this trend, the People Bank of China cut rates by 5bps.

After a mild rebound in July, stock markets in developed countries retreated again in August. The Morningstar Global Markets and Developed Markets Index declined 3.5-4.0%. On the other hand, the Morningstar Emerging Markets Index rose by 1.0%. Among emerging markets, Pakistan and Brazil recorded the most notable increases at 15.3% and 7.0% respectively.

The U.S. Public Company Accounting Oversight Board (PCAOB) signed a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance of the People's Republic of China that will enable the PCAOB to have inspectors on the ground by mid-September for on-site inspections and investigations of firms headquartered in the mainland and Hong Kong. The Morningstar China Index rose slightly by 0.2%.

The U.S. dollar appreciated 2.6% in August as measured by the ICE Spot Index. Asian Currencies generally depreciated against the U.S. dollar. In particular, the Japanese Yen dropped by 3.6%. The Chinese Yuan depreciated a further 2.3% to bring its year-to-date depreciation to 7.6%.

Precious metals plunged even further from July. Gold and platinum fell anywhere from 2% to 5%, while silver experienced a 10.6% drop. 

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Economic and Market News

U.S. Fed Chair’s Speech on Taming Inflation; China Cut Rates by 5bps

  • U.S. Fed to Remain Hawkish – On 26 August, U.S. Fed Chairman Jerome Powell made a speech at the Jackson Hole Conference where he reiterated a hawkish stance to tame inflation by stating that “we must keep at it until the job is done”.
  • China Cut Rates by 5bps – On 22 August, the People’s Bank of China cut its 1-year loan prime rate (LPR) by 5bps to 3.65%. The last time the Bank reduced the rate was in January 2022.
  • Other Rate Hikes Around the World – Several central banks around the world also raised interest rates in August. Examples include Australia (+50bps), Brazil (+50bps), the UK (+50bps), Thailand (+25bps), New Zealand (+50bps), the Philippines (+50bps), Indonesia (+25bps) and South Korea (+25bps).

 

China Economic Data: Inflation surged to 2.7% in July; Caixin/Markit PMI and Official PMI Both in Contraction Territory

  • Inflation rose to 2.7% in July from 2.5% in June. This was the highest reading since July 2020. The increase in pork prices was a key contributor, rising 20.2% YoY.
  • China’s Caixin/Markit PMI slipped to 49.5 in August from 50.4 in July. The official PMI rose slightly to 49.4 in August from 49.0. Both readings are now in contraction territory. 

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About Author

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

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