Commentary

April 2019

Important Risk Disclosure for PAIF

  • ABF Pan Asia Bond Index Fund ("PAIF") is an exchange traded bond fund which seeks to provide investment returns that corresponds closely to the total return of the Markit iBoxx ABF Pan-Asia Index ("Index"), before fees and expenses, and its return may deviate from that of the Index.
  • PAIF primarily invests in local currency government and quasi-government bonds in eight Asian markets, comprising of China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore and Thailand.
  • Investment involves risks, including risks of exposure to bonds in both developed and emerging Asia markets. Investors may lose part or all of their investments.
  • PAIF is not "actively managed" and will not try to "beat" the market it tracks.
  • The Executives' Meeting of East Asia and Pacific Central Banks group (the "EMEAP") member central banks and monetary authorities are like any other investors in PAIF and each of them may dispose of their respective interest in the Units they hold. There are no guarantees that the EMEAP member central banks and monetary authorities will continue to be investors in PAIF.
  • The trading price of PAIF may differ from the underlying net asset value per share.
  • PAIF may not be suitable for all investors. Investors should not invest based on this marketing material only. Investors should read the PAIF's prospectus, including the risk factors, take into consideration of the product features, their own investment objectives, risk tolerance level etc and seek independent financial and professional advices as appropriate prior to making any investment.

Asian bond market fell in April. All underlying bond markets declined with Korean market being the worst dragged down by won weakness. The Markit iBoxx ABF Pan-Asia Bond Index fell -1.27% on an unhedged basis, in US dollar terms, and fell -0.49% on a USD hedged basis.

During the month, Chinese bonds fell -1.46% in USD terms. The 1Q19 GDP (+6.4% y/y) slightly beat consensus estimates, while April manufacturing PMI (50.1) pointed to a softer start in 2Q. March y/y monthly releases suggested marked improvements: Exports (+14.2%) came in better than expected while imports fell -7.6%. Meanwhile, industrial production (+8.5%), retail sales (+8.7%) and year-to-date fixed asset investment growth (+6.3%) all improved. CPI climbed to +2.3% due to higher food and oil prices and PPI picked up to +0.4%. Finally, broad credit growth accelerated, indicating that the PBoC’s monetary easing is gaining traction.

Hong Kong fixed income market fell -0.6% in dollar terms. The 1Q19 advanced GDP rose +1.2% q/q (+0.5% y/y). March exports fell -1.2% y/y amid adverse external environment and retail sales declined by -0.2% y/y. Both CPI (+2.1% y/y) and unemployment rate (2.8%) were unchanged in March.

The Singapore fixed income market declined by -0.74% in USD terms. The 1Q19 preliminary GDP rose +1.3% y/y. March Industrial production fell -4.8% y/y and Non-oil domestic exports fell -11.7% y/y with electronic exports dropping by -26.7%. February retail sales unexpectedly fell -10% y/y (-10.7% if excluding auto sales) while March CPI inched up to +0.6% y/y. Finally, April PMI eased to 50.3 with electronics sector index falling to 49.5.

Korean bond market dropped by -2.78% in USD. The Bank of Korea left interest rates unchanged at 1.75%. The 1Q19 GDP unexpectedly fell -0.3% q/q (+1.8% y/y) with broad-based weakness. March industrial production fell -2.8% y/y while April export decline narrowed to -2% y/y. April CPI accelerated to +0.6% y/y mainly due to higher energy, food and alcohol prices.

Malaysian bonds went down by -1.15% in aggregate amid news that FTSE Russell may drop MYR denominated bonds from its world bond index. February industrial production slowed further to +1.7% y/y. March exports fell less than expected at -0.5% y/y and CPI turned positive (+0.2% y/y) the first time in three months.

Thai bonds edged down by -0.5% in USD. March exports fell -4.2% y/y due to decline in electronics components, appliances and petroleum related products but trade surplus widened led by larger decline in imports. CPI was little changed (+1.23% y/y) in April.

Indonesian bond market fell -0.27% in dollar terms. The 10 year government bond yield increased by 20bps to 7.83% as of 30 April, 2019. The Bank Indonesia left interest rates unchanged at 6% as expected. The 1Q19 GDP slowed to +5.1% y/y from +5.2% the previous quarter. March exports fell -10% y/y but trade surplus increased. April CPI climbed to +2.83% y/y driven by higher food and transport prices.

The Philippine bonds lost -1.56% in USD. On April 30 S&P raised its sovereign credit rating for the country by one notch to BBB+ from BBB with a “stable” outlook, triggered by the growth outlook with S&P strengthening its assessment on the economy. February exports fell -0.9% y/y while trade deficit narrowed due to slower growth in imports. April CPI slowed further to +3% y/y, hitting the midpoint of BSP’s target range (2-4%).

IMPORTANT NOTES:
For Public Use.

Source: SSGA, as of 30 April 2019.

This document is issued by State Street Global Advisors Asia Limited ("SSGA") and has not been reviewed by the Securities and Futures Commission of Hong Kong.

The views expressed in this material are the views of Bruce Zhang only through the period ended 30 April 2019 and are subject to change based on market and other conditions.

This document may contain certain statements deemed to be forward-looking statements. All statements, other than historical facts, contained within this document that address activities, events, or developments that SSGA expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions and analyses made by SSGA in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes appropriate in the circumstances, many of which are detailed herein. Such statements are subject to a number of assumptions, risks, uncertainties, many of which are beyond SSGA's control. Please note that any such statements are not guarantees of any future performance and that actual results or developments may differ materially from those projected in the forward-looking statements.

The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and SSGA shall have no liability for decisions based on such information.

Past performance is not a guarantee of future results.

Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.

International government bonds and corporate bonds generally have more moderate short-term price fluctuations than stocks, but provide lower potential long-term returns.

Investing involves risk including the risk of loss of principal.

Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates rise bond values and yields usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.

Investing in foreign domiciled securities may involve risk of capital loss from unfavorable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations.

Investments in emerging or developing markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries.

This document may not be reproduced, distributed or transmitted to any person without express prior permission. This document and the information contained herein may not be distributed and published in jurisdictions in which such distribution and publication is not permitted.

The Markit iBoxx ABF Pan-Asia Index referenced herein is the property of Markit Indices Limited and is used under license. The PAIF is not sponsored, endorsed, or promoted by Markit Indices Limited or any of its members.

iBoxx is a registered trademark of Markit Indices Limited, a wholly-owned subsidiary of Markit Group, and may not be used without the owner's written permission. A license is required to refer to or use any Markit iBoxx index in any financial products.

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2555355.1.1.APAC.RTL. Expiry Date: 05/31/2020