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.


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.