Despite signs of an ongoing economic slowdown in China, share prices performed strongly during February. The US announced that it would postpone its planned tariff increases on Chinese exports as talks between the two countries progressed. Elsewhere, index provider MSCI announced that it would expedite an increase in China’s weighting of A-shares in its MSCI Emerging Markets Index
- Brazil’s economy stagnated in Q4 2018
- India’s key interest rate was cut by 25 basis points to 6.25%
- GDP growth in India slowed down
To view the series of market updates through February, click here
Despite signs of an ongoing economic slowdown in China, share prices performed strongly during February and the Shanghai Composite Index surged by 13.8% over the month. The US announced that it would postpone its planned tariff increases on Chinese exports – scheduled to take effect on 1 March – as talks between the two countries progressed. Although the US and China had not reached agreement by the end of February, investors appear hopeful that a resolution to the longstanding trade dispute is in sight.
“Investors appear hopeful that a resolution to the longstanding trade dispute is in sight”
Manufacturing activity in China shrank for a third consecutive month in February, although the contraction was marginally less pronounced compared with January. On a brighter note, as February drew to a close, index provider MSCI announced that it would expedite an increase in China’s weighting of A-shares in its MSCI Emerging Markets Index, bringing forward the rise from May 2020 to November 2019. The move is expected to provide a sharp boost for inflows into A-shares.
Brazil’s economy barely grew at all during the final three months of 2018, posting quarter-on-quarter growth of 0.1%. On an annualised basis, the country’s economy grew by 1.1% in 2018 and 2017, having contracted by 3.3% in 2016 and 3.5% in 2015. Credit ratings agency Standard & Poor’s (S&P) affirmed its “BB-“ rating and “stable” outlook for Brazil, citing the expectation for greater political stability and reform under President Jair Bolsonaro and a “gradual strengthening” of Brazil’s fiscal position.
The Reserve Bank of India (RBI) cut its key interest rate by 0.25 percentage points to 6.25% in February and amended its monetary policy stance from “calibrated tightening” to “neutral”, raising speculation that further cuts may be in the pipeline. Speculation over a cut in rates has been stoked by a subdued inflationary backdrop alongside slowing economic growth. Looking ahead, RBI policymakers expect consumer price inflation to fall within a range of 2.7%-3.2% during the second half of the current fiscal year.
India’s annualised economic growth slowed to 6.6% during the final three months of 2018, compared with growth of 7% between July and September. The country’s economic expansion was hampered by softer growth in agriculture and manufacturing. The forecast for growth in the 2018-19 fiscal year was trimmed from 7.2% to 7%. General elections are scheduled to take place in April and May. The CNX Nifty Index fell by 0.4% during February.
A version of this and other market briefings are available to use in our newsletter builder feature. Click here.
