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Matthews Asia Country Updates

For the month ending April 2017

China/Hong Kong

In April, the MSCI China Index returned 2.75% and Hong Kong's Hang Seng Index returned 2.13%, both in local currency terms. China's domestic CSI300, the A share index, returned -0.45% in local currency terms (-0.68% in U.S. dollar terms). The renminbi (RMB), ended the month at 6.89 against the U.S. dollar.

Chinese economic data beat expectations with real GDP rising 6.9% year over year, nonmanufacturing PMI registering an expansionary level of 54.0 and both imports and exports growing at robust levels. The U.S. government announced it would not label China a “currency manipulator,” which was news welcomed by markets as a signal that both sides may be trying to avoid a trade war. A stable RMB exchange rate, moderately higher interest rates and increased capital account controls have stabilized FX reserves and outflow pressure. Early company earnings releases are showing a broad-based improvement, which has spread from the industrial sector into more consumer-oriented companies.


In April, the S&P Bombay Stock Exchange 100 Index returned 1.96% in U.S. dollar terms (2.77% in local currency terms).

Indian stocks gained in April, posting the strongest year-to-date return of any major emerging market country. The Indian economy seems to have largely recovered from demonetization late last year with manufacturing PMI at 52.5—the fourth straight increase since December. Both imports and exports were robust in April, up 45.3% and 27.6%, respectively YoY. Wholesale prices eased slightly and long range weather forecasts are predicting a “normal” monsoon season this summer. If realized, a healthy monsoon should act to limit inflationary pressures and allow the central bank to resist raising rates aggressively later this year. Even though locals and foreigners alike seem to be embracing the first three years of Prime Minister Narendra Modi’s government, Indian stock valuations are challenging and have priced in positive sentiment. Further increases in stock prices will need to be driven by corporate fundamentals and earnings.


In April, the Tokyo Stock Price Index returned 1.27% in local currency terms (1.17% in U.S. dollar terms). The yen ended the month at 111.49 against the U.S. dollar. Japanese stocks were moderately higher in April and up more than 5.7% year to date—which lagged behind the U.S. and EAFE (Europe, Australasia and Far East) as foreigners continued to pare back their holdings. Japan’s macroeconomic environment continues to be favorable as export and production activity are supporting upward revisions in GDP growth. Consumer confidence is approaching a four-year high as unemployment continues to grind lower and labor market conditions continue to tighten. Domestic equities have been supported by moderately higher wages while export-oriented names enjoy a relatively weak yen to support sales abroad. Prime Minister Shinzo Abe’s government received a boost as it was voted to extend the LDP Presidency to three three-year terms (from two three-year terms) in order for Abe to stay in power through September 2021.

South Korea

In April, the Korea Composite Stock Price Index (KOSPI) returned 0.38% in U.S. dollar terms (2.09% in local currency terms). The Korean won rose by 1.72% against the U.S. dollar. Korean stocks were up slightly in April albeit at a slower pace than during the first three months of the year. Optimism surrounding the upcoming presidential election helped support markets in April. The main candidates, particularly front-runner Moon Jae-in, campaigned to quicken corporate governance reform in an effort to increase the transparency of ownership structure in large chaebol businesses. Investors are hopeful that corporate governance reform can unlock value in many businesses through higher dividend payouts and fewer related party transactions. The economy has been solid, supported by impressive export growth especially in semiconductors and computer related products.

Southeast Asia 

In April, the broader Southeast Asian benchmark, MSCI ASEAN posted a gain of 2.10%. The Philippines Composite Index grew the fastest in the Southeast Asia region, gaining 4.89% (and 5.24% in U.S. dollar terms). Trade data released during the month supported a continuation of domestic demand-driven growth, exports rose 11% year-on-year compared with the prior month's growth of 24%. Imports grew at a faster pace, led by higher imports of fuel and capital goods. 1Q17 real GDP growth is projected to reach 7% according to the Finance secretary. Inflation rose 3.4% year-on-year during the month and remained within the 2% to 4% target rate range. Inflation risk and sustained domestic demand strength is likely to put pressure on the current account and on the Philippine peso. Strong inflows from overseas work remittances (OFW) tourism revenues are likely to offset part of that pressure. Tourist arrival data showed that 71,000 tourists arrived from China for the first two months of the year, increasing 36% year-on-year, up from 19% in 4Q16.
Indonesia’s Jakarta Composite Index continued its positive move, increasing 2.34% (2.32% in U.S. dollar terms). Markets moved higher as the overhang of the gubernatorial elections in Jakarta was lifted. Strong exports increasing 23% year-on-year over the month—driven mainly by continued growth in coal and rubber commodities, improvements in domestic activity and a stable outlook of the rupiah underpinned the returns of the market.
Malaysia's KLCI Index gained 1.66% during the month (3.64% in U.S. dollar terms). Cost-driven demand boosted Malaysia's inflation to 5.1% year-on-year from 4.5% the previous month, mainly from fuel and transport costs. Domestic demand remains relatively subdued.  Business conditions and consumer sentiment, however, made positive ground. Malaysia's trade echoed that of the broader region, with exports and imports both up. Malaysia saw strong net foreign equity inflows of US$581 million.
Thailand's SET Index was mostly flat in U.S. dollar terms, which contrasted activity data released during the month that pointed to sustained expansion in domestic demand. Private consumption and investment were positive. Rural incomes accelerated, growing 29.9% in March year-on-year and consumer confidence moved higher. Export growth, which could lead to high trade surplus, along with rising tourism-related revenues may likely put upward pressure on the Thai baht, potentially generating headwinds for stronger export growth.

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.