Country Updates for the month ending September 2019

For the month ending September 2019

China/Hong Kong

In September, the MSCI China Index returned 0.03% and Hong Kong's Hang Seng Index returned 1.87%, both in local currency terms. China's domestic CSI300, the A-share index, returned 0.48% in local currency terms (0.59% in U.S. dollar terms). The renminbi (RMB), ended the month at 7.15 against the U.S. dollar.

Chinese equities were flat in September. A-shares posted slight gains while small caps posted slight losses. Although the near-term trade negotiation outcome seems unpredictable, the popularity of strong trade war rhetoric in the U.S. seems to be fading as the U.S. economy shows signs of weakness. Hong Kong protestors remained diligent and Chinese economic data continues to reflect a moderate slowdown. Further signs of economic weakness increases the likelihood of Chinese monetary and fiscal easing. In fact, we believe that Chinese policymakers stand ready to stimulate activity—aggressively if needed—which should limit economic weakness and ultimately help support corporate earnings.


In September, the S&P Bombay Stock Exchange 100 Index returned 5.21% in U.S. dollar terms (3.97% in local currency terms).

Indian equities posted strong returns in September. Indian policymakers surprised markets by announcing a series of stimulative policies. The prior-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. The Indian government announced a significant cut in corporate tax rates from an effective rate of 34% to roughly 25% with additional cuts for manufacturing companies. Although the hit to fiscal revenues is estimated to be approximately 0.7% of GDP, corporate tax cuts are estimated to boost broad corporate earnings higher by 6-7%. Overall, market participants have interpreted government actions to be supportive and broadly positive and Indian equities were some of the strongest regional performers late in September.


In September, the Tokyo Stock Price Index returned 5.92% in local currency terms (4.17% in U.S. dollar terms). The yen ended the month at 108.08 against the U.S. dollar.

Japanese equities were a bright spot within the region in September and the third quarter as the Japanese yen benefited from its “flight to quality” status amid overall high levels of uncertainty. Japanese value stocks rallied fiercely in early September, outperforming growth as U.S. rates spiked higher. Value-oriented names, especially financials, moved higher and growth-oriented, higher P/E stocked lagged. The Japanese economy continues to move sideways and inflation still falls 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 ETF purchases. On a positive note, stock buybacks continued at a record pace.