MARKETS on the whole eased 0.16 per cent for the week ended June 14, 2013 as continued worries over the timing and quantity the Federal Reserve (Fed) could modify its pace of purchases by dominated markets. Amongst the developed markets, Japan was the sole index to deliver a positive return for the week, rising 2.47 per cent as its 1Q2013 GDP was revised upwards despite Abe’s structural reform plan which disappointed markets.
The US and Europe fell 0.47 per cent and 0.17 per cent respectively for the week, with the former seeing its long term rating from Standard & Poor’s upgraded from negative to stable.
Over in Asia, the Asia ex Japan regional benchmark fell 2.10 per cent on broad based weakness with markets in both North Asia and Southeast Asia tumbled. China (HSML100) led the decliners with a loss of 3.71 per cent in the wake of weak data pertaining to a host of economic indicators.
Hong Kong, Korea and Taiwan fell by 2.25 per cent, 2.23 per cent and 1.87 per cent as the disappointing Chinese data negatively impacted them.
Other poorer performers were the Thai and Indonesian indices, which had seen astronomical returns over the past few years, falling by 2.67 per cent and 2.30 per cent respectively with the Bank of Indonesia surprising markets with a rate hike.
The Singapore benchmark lost 0.52 per cent for the week, with economists revising national growth downwards, sending the FTSE Straits Times Index into negative territory for the year(1.50 per cent on a year-to-date basis as of June 14, 2013, excluding dividends).
In the emerging markets, the week’s poorest performer was the Brazilian Bovespa benchmark, tumbling 4.17 per cent as concerns over the state of the economy as retail sales missed estimates on both a month-on-month and year-on-year measure.
The other components of BRIC, the cornerstone of the emerging markets, also delivered negative returns, with Russia and India falling by 1.02 per cent and 1.45 per cent respectively. On a whole, the emerging markets benchmark index fell 2.22 per cent for the week.
China: A host of economic data disappoints
Economic data released over the previous weekend disappointed across the board.
Exports showed meagre growth in the month of May, growing by one per cent after a 14.7 per cent growth rate in April, missing estimates of a 7.4 per cent growth rate consensus had forecasted.
Imports likewise signalled a weak economy, contracting by 0.3 per cent on a year-on-year basis after growing 16.8 per cent in April 2013. Estimates had called for a 6.6 per cent growth rate in imports. The latest numbers for the export figures are at a 10 month low.
Other disappointing data came from new yuan loans, which had been estimated to hit a target of 815 billion yuan, only for it to record a figure of 667.4 billion yuan, down from April’s 840.4 yuan billion figure. Industrial production also disappointed, registering a growth rate of 9.2 per cent in May on a year-on-year basis, coming in lower than April’s 9.3 per cent reading and estimates for a 9.4 per cent growth rate.
Southeast Asia: Malaysian industrial production weak, Bank of Indonesia’s rate surprise
In Malaysia, industrial production rose by 4.7 per cent on a year-on-year basis in April following an upward revised 0.1 per cent contraction seen in March.
Consensus estimates had forecasted industrial production to rise by 1.6 per cent. On a month-on-month basis, industrial production fell by 1.7 per cent following a 11.7 per cent growth rate in March.
Amongst the various components, manufacturing and electricity both rose by six per cent and eight per cent on a year-on-year basis respectively, while mining fell 0.1 per cent to detract from the strong growth in the other two components.
Bank of Indonesia surprised markets during the week with a 25 bps hike in the benchmark interest rate, to bring the rate to 6.0 per cent. The hike was the first since February 2011 and surprised consensus who were expecting the rate to remain unchanged.
Citing its intention to pre-empt rising inflation expectations and to maintain economic and financial stability, the unexpected move could be seen as the central bank attempting to stabilise the Indonesia rupiah which has fallen by 2.4 per cent against the US dollar since the start of the year (at one point, the rupiah was down 4.4 per cent against the greenback).
The Bank of Indonesia has been roviding support to the rupiah in recent times, with the central bank intervening in the foreign exchange market in an attempt to support the rupiah in recent times.
However, Bank of Indonesia seems to have limited firepower to intervene in the currency market given its reserves have fallen 5.7 per cent in a year and currently stands in the region of US$100 billion.