ASIA STOCKS: Asian Equities Edge Higher, Tech Stocks Fuel The Rally
Asian markets extended gains for a second session, with sentiment buoyed by an AI-fueled rally in Chinese tech stocks, as investors bet on Alibaba as a major AI beneficiary. Risk appetite also improved on US-Russia talks aimed at ending the Ukraine war, easing geopolitical concerns and contributing to a decline in oil prices on speculation of reduced risks to Russian supply. While hotter-than-expected US CPI data triggered a Treasuries selloff on Wednesday, Asian equities largely shrugged off the impact, focusing instead on China’s tech momentum and broader risk-on sentiment, The MSCI Asia Pacific Index climbed 0.9%, with Alibaba and Toyota Motor among the biggest contributors. Meanwhile, gold remained near record highs, reflecting persistent safe-haven demand.
- Japan's Topix is +1.3% and the Nikkei +1.5%, boosted by a weaker yen and strength in exporters. Rakuten Bank surged 12% after raising its full-year net income forecast, while SoftBank fell 5.2% after reporting a larger-than-expected Q3 net loss.
- In Hong Kong & China the Hang Seng Index jumped 1.6%, with the Hang Seng Tech Index on track for its highest close since February 2022, up 1.50%. Alibaba hit a 2yr high, benefiting from AI optimism. However, China’s CSI 300 slipped 0.1%, weighed by renewed concerns over the property sector. China Vanke fell 7.9%, as skepticism grew over whether Beijing’s proposed 50B yuan ($6.8B) funding plan would be enough to stabilize the firm. BBG China property Developer gauge was down 3% at one stage, however has recovered somewhat to trade 0.75% lower at the break.
- South Korea's Kospi gained 1%, while the Taiwan's Taiex rose 0.3%, following global risk-on sentiment.
- Very little happening in Australian & New Zealand with key benchmarks in both regions little changed
- India's Nifty 50 is 0.4% higher, with traders eyeing PM Modi’s meeting with Trump in Washington, though sentiment was cautious amid skepticism over potential trade benefits.
- Elsewhere in asia we have seen a mixed performance, with Thailand (+0.7%) and the Philippines (+0.6%) higher, while Indonesia (-0.9%) and Malaysia (-0.5%) lagged.
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STIR: RBNZ Dated OIS Sharply Firmer After QSBO
It was a heavy session for the local market, with the move driven by the positive signals from the Q4 NZIER Business Opinion Survey. It had a significant influence on the OIS market, which tempered expectations for RBNZ easing.
- To sum up, the QSBO survey showed that a net 16% of businesses expect the economy to improve, vs 1% expecting it to get worse in Q3. This was the first positive outlook since Q2 2021. After seasonal adjustment, a net 9% of businesses expect the economy to improve, vs a revised 4% expecting deterioration in Q3.
- RBNZ dated OIS pricing closed 3-18bps firmer across meetings, with late 2025 leading.
- 45bps of easing is priced for February, with a cumulative 108bps by November 2025. The expected official rate for November has firmed 30bps since Friday’s close.
Figure 1: RBNZ Dated OIS Today vs. Yesterday (%)
Source: MNI – Market News / Bloomberg
AUSSIE BONDS: Slightly Richer Ahead Of US PPI Data
ACGBs (YM +1.0 & XM +1.5) are slightly stronger on a data-light session.
- Outside of the previously outlined Westpac consumer confidence, there hasn't been much by way of domestic drivers to flag.
- Cash US tsys are ~1bp richer in today’s Asia-Pac session after yesterday’s modest sell-off. US PPI data will be released later today, ahead of CPI data tomorrow.
- Cash ACGBs are 1-2bps richer with the AU-US 10-year yield differential at -15bps.
- Swap rates are 1-2bps lower.
- The bills strip is little changed.
- RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut is fully priced for April (102%), with the probability of a February cut at 68% (based on an effective cash rate of 4.34%).
- Tomorrow, the local calendar is empty.
- AOFM Bond issuance will resume this week, with A$800mn of the 3.50% 21 December 2034 bond to be sold tomorrow and A$700mn of the 2.75% 21 November 2027 bond to be sold on Friday.
FOREX: Leveraged Funds Add to JPY & CAD Shorts In Week Ending Jan 7
The updated CFTC positioning data for FX markets, shows leveraged investor shifts in favor of the USD in the first week of January. The table below shows the weekly change and outright position for leveraged contracts and asset managers by currency. This is as at January 7th, so last Tuesday.
- A big shift was against JPY, with near -11k shorts added by leveraged names. Outright shorts stand at -53.2k, but this is short of 2024 extremes, which extended beyond -100k.
- CAD shorts were also added to, with -94.6k outright shorts the most as measured by leveraged investors. This is close to recent cycle lows for leveraged shorts.
- The bias for asset managers was generally in favour of the USD, albeit in smaller magnitudes compared to the leveraged side. The exception was the AUD, where current shorts were cut. CAD shorts were also cut but by a much more modest amount compared to the AUD.
Table 1: CFTC Positioning - By Currency & Investor Type
| Leveraged Contracts | Asset manager Contracts | |||
| Weekly Change | Outright Position | Weekly Change | Outright Position | |
| JPY | -10844 | -53162 | -1049 | -9579 |
| EUR | 252 | -41588 | -2598 | 151263 |
| GBP | -1795 | 47313 | -3156 | -58082 |
| AUD | -558 | -33788 | 14000 | -42846 |
| NZD | -1768 | -13547 | -1191 | -40443 |
| CAD | -9722 | -94579 | 1934 | -160295 |
| CHF | -4041 | -9808 | -85 | -36062 |
| MXN | -8353 | -6075 | 389 | 6945 |
Source: CFTC/Bloomberg/MNI - Market News
