Winds of Change: Asia Pacific ex-Japan Monthly Wrap - April 2011 - JP Morgan

· MSCI APxJ marginally outperformed MSCI AC World by 0.3% in April. Without positive fundamental surprises, markets overlooked the winds of change in DM and carried on momentum. Growth is moderating in China. Economic momentum, an important fundamental support for equity markets, is fading. Note the swing in the EASI Index (see Figure 3). US Real GDP growth slowed to 1.8% in 1Q11.

· The top three Asian markets in US dollars were Korea, Taiwan, and the Philippines. Korea outperformed APxJ by 3%; partly helped by the expectation of capturing market share from Japanese companies. India, China and Malaysia were the worst performers in April.

· At the sector level, Consumer Discretionary, Consumer Staples, and Materials were the best performers in APxJ. Energy, Utilities and Healthcare were the worst performers (see Table 2). The best performing country sectors were Korea Consumer Discretionary (+14.9%), Korea Industrials (+9.1%) and Hong Kong Consumer Discretionary (+8.5%). The worst performers were India IT (-5.4%), China Energy (-3.7%) and Hong Kong Industrials (-2.8%).

· The AUD was the strongest DM currency, up 6.2% against the dollar in April and setting a new high of 1.0971. The euro and Sterling were also strong, gaining 5% and 4% against the dollar respectively. DXY declined 4%. The Singapore Dollar (+3%), Korean Won (+2.9%) and Taiwanese Dollar (+2.6%) were the other top performing Asian currencies in April.

· Precious metals moved up sharply in April, with gold reaching a new milestone, breaching the $1500/oz mark. A combination of rising inflation expectations and increasing downside risks to the recovery are key reasons behind the rally, in our view. Both Brent and WTI rallied by 7.4% and 6.8% due to tight supply in oil market, as OPEC appears to have failed to cover the loss of supply from Libya. The GSCI Agriculture declined by 1%.