Asia ETF Roundup (Market) – October 2022

China held its 20th National Congress of CPC; ECB hikes rates by another 75bps.

Jackie Choy, CFA 09 November, 2022 | 15:21
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For the latest ETF industry news, please refer to our “Asia ETF Roundup (Industry) – October 2022”.

Major Markets Performance

In mid-October, the 20th National Congress of the Communist Party of China (CPC) was held in Beijing to shed light on the next five years’ development priorities and visions for the country. Chairman Xi Jinping secured a third term as General Secretary of the Central Committee of the CPC and the new members of the Standing Committee of the Political Bureau of the CPC Central Committee were unveiled. China equity markets, proxied by the Morningstar China Index, saw a decline of 16.0% in October, putting its year-to-date decline at 41.1%. This bucked the trend of a recovery observed in the developed equity markets in October. The Morningstar Global Markets and Developed Markets indexes rose 6.0% and 7.2%, respectively. Meanwhile, emerging and frontier equity markets performance was mixed. Stocks in Brazil, Pakistan and the Philippines rose 6-9% while stocks in Taiwan and Indonesia fell 4.8% and 1.6%, respectively (proxied by their respective Morningstar market indices).

The U.S. dollar depreciated 0.5% in October as measured by the ICE Spot Index. The Euro rebounded 0.9% against the greenback amid the ECB’s rate hike of 0.75%. Meanwhile many Asia currencies depreciated against the U.S. dollar. In particular, the Japanese Yen plunged by 2.6% against the greenback in October, clocking a cumulative fall of 22.5% in the first 10 months of 2022. The Chinese Yuan depreciated 2.8% in October to bring its year-to-date depreciation to 12.7%.

Performance of the precious metals was mixed. Platinum prices surged 8.2% while gold prices fell 2.0%. 

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Economic and Market News

75bps Rate Hikes in the U.S. (in November) and in the Eurozone

  • U.S. Fed hiked rates by another 75bps – On 2 November, the U.S. Fed raised its target funds rates by 75bps, putting the range to 3.75% - 4.0%. In total, the U.S. Fed has raised rates by 375bps since March 2022.
  • ECB hiked rates by another 75bps – On 27 October, the European Central Bank raised its key rates by 75bps to 1.50%. This was the third hike this year. The Governing Council stated that “[it] has made substantial progress in withdrawing monetary policy accommodation” and “expects to raise interest rates further, to ensure the timely return of inflation to its 2% medium-term inflation target.”
  • Other Rate Hikes Around the World – Several central banks around the world also raised interest rates in October. Examples include Australia (+25bps), Indonesia (+50bps), New Zealand (+50bps), South Korea (+50bps) and Vietnam (+100bps).

China Economic Data: Q3 GDP Growth at 3.9%; Inflation rose to 2.8% in September; Caixin/Markit and Official PMI in Contractionary Territory

  • China’s Q3 2022 GDP grew 3.9% YoY, a pickup from 3.5% YoY growth in the previous quarter. In the first three quarters combined, China’s GDP grew 3% YoY. The growth rate remains below the government's annual goal of “around 5.5%”.
  • Inflation rose to 2.8% in September from 2.5% in August. This is the highest level since April 2020.
  • China’s Caixin/Markit PMI rose slightly to 49.2 in October from 48.1 in September. On the other hand, the official PMI fell to 49.2 in October from 50.1 in September. Both readings returned to 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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