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Matthews Asia Country Updates

For the month ending April 2015

China/Hong Kong 

In April, the MSCI China Index returned 16.68%. Hong Kong's Hang Seng Index returned 13.03% (13.05% in U.S. dollar terms) and China's domestic CSI300, the A share index, returned 17.33% (17.37% in U.S. dollar terms). China's currency, the renminbi, ended the month at 6.20 against the U.S. dollar.

China released its first quarter GDP growth figures in April, and showed that its country grew 7% over the first quarter ending March 2015. This growth figure further declined from the 7.3% growth pace seen in the fourth quarter of 2014 and marked the slow pace of growth in recent history. 

Growth in many parts of China’s economy still remains tepid. Infrastructure investment in China moderated to 13.2% over the month of March, down from 13.9%. Both manufacturing and property related infrastructure investment continued to slow to 10% and 7%, respectively. 

Industrial production figures also remained weak, growing only 5.6% in March and further declining from the 7% growth seen in February. Exports decreased -15% in March, after rising 15% over the first two months of the year. Imports were also weak and declined -12.7% in March after dropping 20.3% over January and February. Weak commodity prices, as well as weaker domestic demand, have contributed to lower imports for the year thus far. Inflation data for March, which was released in April, came in largely in line with expectations. The consumer price index was flat at 1.4% and still falls short of China’s full year expectations of 3%. 

In hopes of revitalizing the economy, China launched its second reserve ratio requirement (RRR) cut this year in April after its first RRR cut in February. The market was surprised by a larger-than-expected cut of 100 basis points (1%) when a cut of only 50 basis points (.50%) was previously expected, perhaps signaling a greater urgency to boost the domestic economy. This move is estimated to release about RMB 1.5 trillion (US$242m) into the banking system in China. Further monetary easing continues to be expected. 


In April, India’s markets corrected as the Reserve Bank of India (RBI) held interest rates unchanged. The Bombay Stock Exchange 100 Index fell -3.35% in local currency terms (-5.27% in U.S. dollar terms), led by declines in the information technology sector. 

The RBI’s cautionary decision to hold back further interest rate reductions disappointed the market. However, subsequent events over the month, including a sharp increase in crude oil prices, unseasonal rains that led to crop damage, and increasing risks for a below-average monsoon season, suggest that the RBI move was well-placed. RBI expects that inflation would slip to 4% by August 2015 but firm up to 5.8% by the end of FY 2016.

In terms of economic reforms, market participants are increasingly adopting the view that the government is going to face an uphill task and that investment-led demand recovery may be more gradual than the current expectations that are baked in stock valuations.

Another issue of some concern, especially amongst Foreign Institutional Investors, was that of a retrospective Minimum Alternative Tax (MAT) for overseas portfolio managers. Foreign investors have always had concerns about the stability of India’s tax regime, and current events have brought those fears front and center. Foreign Institutional Investors are largely awaiting government clarification over MAT-related tax matters.

April in India marked the start of the quarterly reporting season for the period ending March 2015. Results and commentary from management team thus far suggest that earning expectations for fiscal year 2016 have run ahead. 


In April, the Tokyo Stock Price Index increased by 3.22% (3.48% in U.S. dollar terms). Energy, financials and telecommunication stocks outperformed the market while health care, materials and information technology stocks were the largest underperformers. The yen strengthened against the U.S. dollar by 0.62% over the period. Macroeconomic data for the month was mixed. The trade balance in March returned to surplus for the first time since 2012 as export growth was supplemented by the reduced cost of imports, which in turn was facilitated by lower oil prices. However, household spending continued to show weakness and major rating agency Fitch downgraded the long-term credit rating due to concerns over the fiscal position. 

For the first time in several months, inflation figures were mildly ahead of expectations. The consumer price index, excluding fresh food and energy, rose 2.1% in March although this figure remains low in light of the impact of the consumption tax hike last year. While the Bank of Japan has refrained from increasing its monetary stimulus at this point, it has pushed back its 2% inflation target to mid-2016 while lowering its core inflation forecast for this fiscal year from 1% to 0.8%.


During the month, the Korea Composite Stock Price Index advanced 4.22% in local currency terms (7.25% in U.S. dollar terms). The Korean won appreciated 2.86% against the U.S. dollar.
April saw an estimated trade surplus of US$8.5 billion. Due to lower oil prices, both imports and exports have continued to decline in volume each month this year, and in its monthly trade report, the South Korean government referenced concerns over declining global trade. According to the World Trade Organization, trading volumes for 70 major countries fell -3.1% in the fourth quarter of 2014 year-on-year, and -12.2% in January and -10.6% in February this year, compared to the same months last year. Despite this, Korea’s trade surplus flow has seen record highs for three consecutive months since February. Now as the world’s sixth biggest exporter, Korea also experienced a smaller decline in exports this year compared to the larger exporting economies of China, the U.S., Germany, Japan and the Netherlands. 
During the month, the Bank of Korea held its policy rate steady at 1.75%. Korea’s consumer price index for April was unchanged from the previous month at 0.4%. Core inflation, excluding the effects from energy and food products, stood at 2.3%. 

Southeast Asia 

In April, the MSCI South East Asia Index returned 1.12% in U.S. dollar terms. Notably, the Jakarta Stock Exchange Composite Index (JCI) declined 7.83% in local currency terms (7.12% in U.S. dollar terms). The FTSE Bursa Malaysia KLCI Index declined 0.68% in local currency terms (and advanced 2.96% in U.S. dollar terms). 

The JCI declined from its March record high due to weaker-than-expected first quarter earnings from consumer discretionary firms and banks that compose a significant portion of the index. A slowdown in consumption, lower commodity prices and higher-than-expected loan losses were some of the reasons behind the weak earnings. 

Macroeconomic fundamentals, however, appeared to be turning positive. BKPM, the investment coordinating board of Indonesia, which is the primary interface between business and government, reported first quarter realized investment—both domestic and foreign—growth of 16.9% year-on-year, reaching a quarterly record of about US$9.65 billion.

In Malaysia, a long delayed 6% Goods and Services Tax was implemented despite protests from consumers who claimed the tax would increase their cost of living. The Ministry of Finance estimates that the consumption tax will generate about an extra US$ 5.40 billion in revenue for the remaining nine months of 2015. Political reforms, however, continue to lag economic reforms. The parliament passed tougher penalties, such as longer prison terms and detention without bail, under the Sedition Act. The law is viewed as an instrument mainly aimed at suppressing opposition groups.

April 2015

The views and information discussed in this article are as of the date of publication, are subject to change and may not reflect the writer's current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investments vehicles.