Equity markets worldwide declined over the week ended January 16, 2015, with the MSCI AC World index declining 0.6 per cent. Developed markets like the US saw minor declines, with the S&P 500 index incurring a 1.34 per cent loss over the week. Japanese equities also incurred losses, with the Nikkei 225 index declining 1.19 per cent over the week. European equities however, posted a gain of 1.69 per cent over the week, making the region the only developed market under our coverage to record a gain over the week.
Performances were mixed across various emerging and Asian markets under our coverage. The MSCI Emerging Markets index was down 0.51 per cent over the week, while the MSCI Asia ex Japan index was slightly up by 0.35 per cent. Asian markets like South Korea saw its Kospi index decline 1.18 per cent over the week, while Taiwan’s equity market (as represented by the TSWE index) inched up 0.49 per cent. Chinese equities (as represented by the HSML 100 index) declined 0.68 per cent over the week, but the local equity market continued its relentless march upwards, with the Shanghai Composite index inching 2.55 per cent higher while the CSI 300 index increased 2.27 per cent over the week. In Southeast Asia, Indonesia’s JCI index declined 1.81 per cent, while Singapore’s STI index declined 0.72 per cent over the week. Thai equities (as represented by the SET index) remained almost unchanged (0.05 per cent) while Malaysian equities (as represented by the KLCI index) registered a gain of 0.64 per cent over the week.
In other emerging markets, India’s equity market (as represented by the Sensex index) rallied 3.22 per cent over the week as news of the Reserve Bank of India (RBI)’s interest rate cut was absorbed by investors and market participants. Brazilian equities (as represented by the Bovespa index) increased one per cent over the week, while Russian equities (represented by the RTSI$ index) declined by 1.74 per cent. Gold prices surged close to US$60 per ounce to US$1,280.4 over the week, surging by 4.63 per cent in ringgit terms.
South Asia: India’s industrial production increased in November, RBI lowers benchmark rate
Industrial production in India increased by 3.8 per cent year-on-year (y-o-y) in November, up from a prior 4.2 per cent y-o-y decline and beating consensus estimates of a 2.3 per cent y-o-y increase. The growth rates of mining, manufacturing and electricity stood at 3.4, three per cent and 10 per cent y-o-y respectively in November. On a Use-based classification, basic goods, capital goods and intermediate goods production expanded by seven, 6.5 and 4.3 per cent respectively during the same time period. The latest data broke a four-month declining trend in the country’s industrial production increases, and comes as good news to policy-makers seeking to spur economic growth in the South Asian country.
The Reserve Bank of India (RBI) lowered its benchmark interest rate level by 25 basis points, from a prior eight to 7.75 per cent last week.
The central bank made its move in response to falling inflation, with market participants expecting that further policy easing would be possible if inflationary pressures continue to weaken.
In December 2014, the RBI stated that a critical factor in paving the way for further rate cuts would be sustained budget cuts by the government as well as reforms to help improve supply in the key areas of power, land, minerals and infrastructure.
RBI governor Rajan also stated that “crude prices, barring geo-political shocks, are expected to remain low over the year,” and that weak demand has also helped moderate inflation while the government has reiterated its commitment to meet its fiscal deficit target, factors that have aided to reduce inflationary pressures.
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