Asia Pacific ex Japan Monthly Wrap - Waiting for sunshine - JP Morgan

• MSCI APxJ underperformed MSCI World by 5% in February as the unrest in the Middle East and North Africa resulted in heightened risk aversion and an oil price rally increased inflation concerns in EM. For the first time since early December 2008, EM funds had four weeks of net redemptions; Year to date redemptions are now US$14billion versus subscription of US$84billion in 2010.

• The top three Asian markets in US dollars were Indonesia, Thailand and Australia. Taiwan, Korea and Singapore were the worst performers in February (See Table 2). Korea and Taiwan outperformed over the past three months. Strangely the consensus has added to Korean positions while reducing Taiwan to an extreme net underweight of 30 (See Consensus Asset Allocation, Adrian Mowat, 24 February 2011).

• At a sector level, Energy, Materials and Financials were the best performers in APxJ. IT, Industrials and Telecom were the worst performers (see Table 3). The best performing country sectors were Australia Energy (+6.9%), Australia Materials (+5.4%) and Australia Industrials (+4.9%). The worst performers were Korea Industrials (-12.9%), Taiwan Financials (-12.7%) and Taiwan IT (-9.2%)

• The Australian Dollar, Pound Sterling and the Euro were the best performing DM currencies this month appreciating by 2.1%, 1.5% and 1% respectively against the US dollar. The EUR/USD touched 1.3860, its highest level since November. Among the Asian currencies, the Indonesian Rupiah, Philippines Peso and Indian Rupee were the best performers while the Taiwanese dollar and Korean Won were the worst performers.

• Brent gained 11% in the last one month (+30% in the last three months), to touch $119/bbl due to the uprising in Libya and concerns of further contagion in the MENA region. The GSCI Agriculture and Industrial metals also rallied up 3% and 2% respectively. Gold gained 6%.