For the latest ETF industry news, please refer to our “Asia ETF Roundup (Industry) – July 2021”.
Major Markets Performance
In July, Chinese regulators announced a number of regulations and orders in relation to companies in the education and technology sector. This included ordering apps of Didi Global (DIDI, U.S. listed), which launched its initial public offering in the U.S. on 30 Jun, to be removed from Chinese app stores in response to the operator’s data breaches. It was also announced to ban for-profit school tutoring and tutoring companies to raise capital from overseas investors or through public listings. Education stocks were impacted. TAL Education (TAL, U.S. listed) fell 75.9%. And some heavy-weight technology names also saw big losses. Meituan (03690) and Tencent fell 32.9% and 18.0%, respectively. Concluding the month of July, the Chinese equity markets were some of the worst performing markets globally. The Morningstar China Index fell 13.7% in USD terms. Other emerging equity markets generally experienced weakness. Stock markets in the Philippines, Thailand and Brazil suffered 6%-10% losses (proxied by their respective Morningstar indexes in U.S.-dollar terms).
Many developed equity markets brushed off concerns over the highly transmissible COVID-19 delta variant and marched higher during July. The Morningstar Developed Markets Index gained 1.5% for the month. The S&P 500 and Nasdaq notched new all-time highs towards the end of the month, and the Morningstar US Market Index rose 1.9%.
The U.S. dollar appreciated 2.5% (as measured by the ICE Spot Index) in July. Asian currencies generally depreciated against the greenback. The Malaysian Ringgit, Philippine Peso and Baht fell around 2%. The Chinese Yuan was little changed against the U.S. dollar for the month, putting its year-to-date gain at 1.3%.
Precious metals’ performance was mixed in July. The price of Platinum and Silver fell another 1.4% and 1.1%, respectively. On the other hand, the price of gold rebounded 3.6% in July.
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Economic and Market News
China Cut RRR; Rate Hikes in Russia
- China Cuts RRR by 50 bps - On 9 July, The People’s Bank of China (PBOC) announced it was reducing the required reserve ratio (RRR) by 50bps from 15 July. This put the weighted average RRR for financial institutions in China at 8.9%. The PBOC expected the cut would release around RMB 1 trillion (US$154 billion) in long-term liquidity to the economy.
- Russia Hikes Rates by 100bps – The Bank of Russia raised its key interest rate by 100bps to 6.50% on 23 July. This is the fourth rate hike this year, which have collectively added 225bps to its key interest rate. The Bank stated that “the Bank of Russia will consider the necessity of further key rate increase at its upcoming meetings.”
China Economic Data: GDP Growth at 7.9% in Q2, 12.7% in H1; Inflation at 1.1%; Both Caixin/Markit PMI and Official PMI Expand at Slower Pace
- China posted second quarter GDP growth of 7.9% YoY. This is compared to the 18.3% GDP growth in Q1. Cumulatively, GDP grew by 12.7% YoY in the first half of 2021.
- CPI inflation dropped to 1.1% in June from 1.3% in May.
- In July, both the Caixin/Markit PMI and the official PMI continued to fall. The Caixin/Markit PMI fell to 50.3, a 15-month low, from June’s reading of 51.3. The official PMI also fell to 50.4 from June’s reading of 50.9.
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