Asia

  • The region’s central bankers continued to ease monetary policy in May with the Philippines, Singapore and Indonesia all trimming their headline rates to help stimulate their local economies. However, there were already strong signs that China’s stimulus programme was gaining traction. Boosted by recently announced tax breaks on car purchases, Chinese car sales rose above the 800,000 mark in April, to set a new record. Despite slowing, industrial production also remained robust. Output rose by 7.3% in the year to April, down from a rise of 8.3% in the year to March.

  • Elsewhere in the region, Japan’s economy shrank by 4% in the first quarter compared with the last three months of 2008, amounting to a 15.2% annual decline. The chief culprits were a drastic exports slump, a strong yen and dire earnings results from its consumer electronics companies. Meanwhile, Japanese unemployment hit 5%, its highest level in over five years. Some respite was provided by industrial output figures which showed a 5.2% uptick in April.

  • Over the period, the FTSE All-World Asia ex Japan Index outperformed the global average, returning 11.3% compared to the FTSE All-World Index return of 6.7%, in local currency terms. Indian politics surprised many after the Congress party won the elections, sending the domestic market surging 20% in one day alone on expectations of unhindered economic reform.

  • Outside of India, the best performing markets in the region were the US dollar-based markets of Hong Kong, Singapore and Taiwan, while Australia and Korea lagged the global average. Elsewhere, the Chinese market returned just over 16%, while Japan progressed 7%.

  • The Japanese government bond yield curve steepened over the month as investors became increasingly concerned as to the country’s rising national debt. As a result, long-dated Japanese government bonds declined 1.8% in May, contrasting with marginally positive returns for shorter-dated bonds. Elsewhere, 10-year Australian government bonds lost 5.2% in May, as the country’s authorities announced a record budget deficit.




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