Matthews Asia Country Updates

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For the month ending April 2018

China/Hong Kong

In April, the MSCI China Index returned -0.03% and Hong Kong's Hang Seng Index returned 2.53%, both in local currency terms. China's domestic CSI300, the A share index, returned -3.62% in local currency terms (-4.37% in U.S. dollar terms). The renminbi (RMB), ended the month at 6.33 against the U.S. dollar.

Fears of escalating trade rhetoric between the U.S. and China pressured China's equity shares and contributed to increased volatility. Market participants seemed to focus on the potential negative earnings impact of a full blown trade war with the United States. China's measured responses indicate it has no interest in an escalated trade war and President Xi has reiterated policies of open markets, increased intellectual property protection and an overall willingness to cooperate. All eyes are on the U.S. delegation visit to China in early May to discuss trade. In the meantime, China's GDP growth remained resilient with Q1 growth of 6.8% year-over-year, supported by both external demand and flexible monetary policy.

For more on China, please read the latest issue of Sinology.


In April, the S&P Bombay Stock Exchange 100 Index returned 3.81% in U.S. dollar terms (6.20% in local currency terms).

Indian stocks were relative outperformers in April but have lagged behind global emerging markets in 2018. A more sanguine environment for corporate earnings has been offset recently with macro concerns including lackluster government revenue collection (due to underwhelming Goods and Services Tax collection in fiscal 2018), rising imported oil prices and a weaker Indian rupee. Rising oil prices pressured India's already shaky current account while causing bond yields to rise in anticipation of higher inflation. Equity prices have been resilient but have weakened in U.S. terms as the rupee has weakened against the U.S. dollar by almost 4% year to date.  


In April, the Tokyo Stock Price Index returned 3.55% in local currency terms (0.83% in U.S. dollar terms). The yen ended the month at 109.34 against the U.S. dollar.

Japanese equities were moderately positive in April, buoyed by short-term weakness of the yen and easing trade tensions between the U.S. and Japan following Prime Minister Shinzo Abe's April visit to the U.S. Year-to-date equity returns in Japan are only slightly positive, however, as the approval rating of Abe's cabinet has deteriorated in recent months. Market participants appear to be debating the chances that Abe will survive the LDP (Liberal Democratic Party) elections in September. Abe is Japan's third longest-serving post-war leader and many market participants fear that if his approval ratings drop below 30%, Abe will be reluctant to run for re-election. In addition to political headwinds, Japan is facing challenges as a result of its recent success. Last year's strong corporate earnings results are making for a difficult hurdle to surpass. Some analysts are curbing their earnings growth forecasts relative to last year in light of the political uncertainty and challenging base effects.

South Korea 

In April, the Korea Composite Stock Price Index (KOSPI) returned 1.98% in U.S. dollar terms (2.84% in local currency terms). The Korean won declined by -0.43% against the U.S. dollar.

South Korea's equity market bounced higher in April on the back of an historic meeting between the North and South Korean leaders. For the first time, a North Korean leader set foot on southern soil and the two leaders vowed to pursue talks with the United States to sign a peace treaty to officially end the Korean War, which took place from 1950 to 1953 and has divided the Korean peninsula for more than six decades. South Korean exports remained supportive to economic growth and the Trump administration exempted Korean exports of steel from additional tariffs, which removes some uncertainty to the export outlook.

Southeast Asia

In April the broader MSCI ASEAN Index gained 0.83% in U.S. dollar terms.

Malaysia's 14th general election delivered a surprise win for the Opposition Pakatan Harapan (PH) coalition led by former Prime Minister Mahathir Mohamad, now age 92, who unseated the ruling Barisan Nasional coalition led by the United Malays National Organisation (UMNO) that had held power for 61 years. Market focus will revolve around PH's election pledges. Among them is the replacement of the Goods and Services Tax (GST) with the prior Sales and Services Tax (SST); reinstating fuel subsidies within the administration's first 100 days in office; increasing social expenditures and reviewing all major public projects as well as China investments. From an investment flows perspective, Malaysia has had significant inflows over the past 12 months against outflows, compared to the rest of ASEAN. The bond market's response, however, is likely to be pivotal as the size of flows are significantly larger than equity flows, and will likely be a major determinant of the Malaysian ringgit's strength over the near term given its status as one of the best-performing currencies in the past year.
April was a soft month for Indonesia's JCI Index as equities dropped -3.92% (-2.64% in local currency terms). Weakness in Indonesian markets has been affected to a significant degree by the country's depreciating currency, the rupiah (IDR). As one of the few countries in the region with a current account deficit (along with India and the Philippines), Indonesia is susceptible to outflows. Bank Indonesia made recent statements indicating that it would raise interest rates if needed to stabilize the currency. Concerns around the IDR have led to large net equity selling from foreigners to the tune of US$2.5 billion since the start of the year. Earnings revisions, however, are starting to improve for banks and industrials. Valuations are looking more reasonable and the valuation premium over the MSCI Asia ex Japan Index has fallen to a little over 20%, from more than 30% early last year.

Singapore's STI Index increased 4.88% (5.93% in local currency terms) during the month. Singaporean equity markets reacted positively to an improving domestic outlook and have seen positive growth improvements in goods and services industries overall as global trade has held up. The central bank tightened monetary policy slightly at its semiannual policy meeting in April by increasing the pace of appreciation of the Singapore dollar through a higher slope of its Singapore dollar nominal effective exchange rate policy band. Core inflation expectations are subdued, however, and unless it breaks out of the 2% ceiling of the target range, we expect to see no further action this year. 

Source: Bloomberg 

The views and information discussed in this report are as of the date of publication, are subject to change and may not reflect 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 investment vehicles. Investment involves risk. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Past performance is no guarantee of future results. The information contained herein has been derived from sources believed to be reliable and accurate at the time of compilation, but no representation or warranty (express or implied) is made as to the accuracy or completeness of any of this information. Matthews Asia and its affiliates do not accept any liability for losses either direct or consequential caused by the use of this information.