Matthews Asia Country Updates

Share This Page:

For the month ending August 2019

China/Hong Kong

In August, the MSCI China Index returned -4.09% and Hong Kong's Hang Seng Index returned -7.05%, both in local currency terms. China's domestic CSI300, the A-share index, returned -0.69% in local currency terms (-4.47% in U.S. dollar terms). The renminbi (RMB), ended the month at 7.16 against the U.S. dollar.

Chinese equities fell, succumbing to trade-related pressures and negative sentiment. In addition, Hong Kong protestors remained diligent, demanding universal suffrage and the repeal of the extradition bill (among other requests). Stocks suffered as investors remained sidelined while watching the televised protests and reading about U.S. tariff increases on Chinese imports and Chinese retaliation against the U.S. Chinese economic data also continued to reflect a moderate slowdown. We believe valuations in China already indicated significant uncertainty, especially against global peers. Further signs of economic weakness increases the likelihood of Chinese monetary and fiscal easing. We believe Chinese policymakers stand ready to stimulate activity—aggressively if needed—which should limit economic weakness and support corporate earnings.

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


In August, the S&P Bombay Stock Exchange 100 Index returned -4.13% in U.S. dollar terms (-0.45% in local currency terms).

Indian equities fell in August but outperformed many other emerging markets including China. Negative returns in U.S. dollar terms were largely a result of a weak Indian rupee, which fell victim to broad emerging markets currency weakness. In local terms, stocks were flat for the month, supported by policy announcements meant to stabilize economic growth and improve sentiment. The earlier-announced surcharge on capital gains (both domestic and foreign) was reversed, new capital injections into public sector banks were announced and tweaks to tax depreciation rules and expedited Goods and Services Tax refunds were implemented. Policy moves accompanied the fourth-consecutive rate cut year to date. Analysts speculated that more easing is on the horizon. On the bright side, India's current account deficit declined marginally and international reserves moved higher as oil prices remained stable, which helped support the Indian rupee even amid declining rates. In addition, because the Indian economy is fairly closed, the impact of the U.S.—China trade dispute should be minimal.


In August, the Tokyo Stock Price Index returned -3.37% in local currency terms (-1.35% in U.S. dollar terms). The yen ended the month at 106.28 against the U.S. dollar.

Japanese equities were lower for August but were a bright spot within the region as the Japanese yen benefited from its “flight to quality” status. The Japanese economy continued to move sideways and inflation still fell short of the Bank of Japan's 2% target, which has analysts speculating how Japanese policymakers will insulate domestic demand from a slowing global economy. Market participants expect the government to follow through with the planned consumption-tax hike in October, which reinforces the potential need for stimulative policies in the form of lower rates (potentially negative), increased fiscal spending or a rise in exchange-traded fund purchases. On a positive note, stock buybacks continued at a record pace and upper house elections in July were supportive of the Abe government.

South Korea

In August, the Korea Composite Stock Price Index (KOSPI) returned -4.93% in U.S. dollar terms (-2.80% in local currency terms). The Korean won declined by -2.33% against the U.S. dollar.

South Korean equities were some the weakest in the region in August after a fairly weak July. The drivers remain unchanged. Tech-heavy South Korean exports have suffered year to date as investors feared the broad reach of the U.S.—China trade dispute onto South Korean companies. South Korean firms may be subject to second-order effects in terms of their participation in the supply chain of certain Chinese-related exports to the U.S. South Korean corporate earnings have been lackluster. Stock prices were low as of the end of August but valuations were above five-year averages.

Southeast Asia

During August, the broader MSCI ASEAN index returned -4.03% in U.S. dollar terms.

In August, Indonesia's JCI index returned -2.0% in U.S. dollars terms (-0.97% in local currency terms). U.S. dollar performance was weaker as the local currency depreciated following the Indonesian central bank's decision to cut policy rates by 25 basis points and its shift to supporting growth from its previous focus on stability. National economic data released during the month indicated broadly stable domestic demand. Downside risks in the external sector remained pertinent. Government measures aimed at supporting growth look to support the outlook for the rest of the year. President Jokowi pledged to lower corporate taxes, ease stringent labor laws and loosen  restrictions on foreign ownership in more sectors following a landslide election win. Upcoming initiatives to lure foreign direct investment (FDI) will complement tax incentives. The current account deficit has weighed on the pace of growth for Indonesia and attracting more FDI to finance the deficit would be key to spurring growth. Separately, Indonesia announced plans to move the capital from Jakarta to East Kalimantan on the island of Borneo starting in 2024.

In August, Thailand's SET index returned -2.34% in U.S. dollar terms (-2.80% in local currency terms). The country's central bank surprised the market with an interest-rate cut of 25 basis points, which came ahead of a weak GDP release, posting the slowing pace of growth in five years. Both softer domestic demand and weak net exports dragged growth lower. In response, the government announced a Thai baht 316 billion (US$10 billion) stimulus package aimed at mainly shoring up the low-income segment. Key measures include emergency loans, additional cash handouts to lower-income earners, visa waivers for Chinese and Indian tourists and small and medium-sized enterprises loans offered by state banks. Separately, tourist growth improved and Chinese visitors posted the first positive growth since January. Growth had been impacted by boat incidents in Phuket in July 2018.

In August, the Philippines' PSEi index returned -3.18% in U.S. dollar terms (-0.68% in local currency terms). Overall economic growth treaded water. Government consumption and fixed investment growth slowed down as the government remained behind on its 2019 spending plans and the impact of a budget impasse lingered. Weaker-than-expected growth figures created space for more-dovish monetary policy. The Philippines central bank (BSP) is expected to continue to bring down the required reserve ratio (RRR) over the medium term (to a stated level in single digits). Also, given growth risks are skewed to the downside from extended uncertainty on trade, inflation within the BSP's target band and aggressive monetary policy easing from other regional central banks, the BSP is likely to remain on an easing path. 

Sources: Bloomberg, CEIC

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.