ASIA STOCKS: Equities Edge Higher, HK Equities Lead, Sign Of Tariff Relief

JGB futures are stronger, +18 compared to settlement levels, but off session bests.

• (MNI) Many BoJ board members were concerned over the upside risks to prices and saw the need to raise the policy interest rate gradually at the Jan 23-24 meeting but they failed to offer insight into the pace or timeline, the summary of opinions showed.
• A different member said, with economic activity and prices remaining on track, "risks to prices have become more skewed to the upside." 
• The board hiked the policy rate 25bps to 0.5% at the January meeting, the first increase since July 2024 and its highest level since 2008.
• In today’s Asia-Pacific session, cash US tsys have twist-flattened, with yields ranging from 4bps higher to 4bps lower. In addition to tariff developments, this week’s focus in the US will be on a heavy slate of corporate earnings, key CPI and PPI inflation data, and January’s headline employment report.
• Cash JGBs are mixed across benchmarks, with yields 1bp lower to 1bp higher. The benchmark 10-year yield is 0.6bp lower at 1.239% versus the cycle high of 1.262%.
• Swap rates are 1-2bps lower. Swap spreads are slightly mixed.
• Tomorrow, the local calendar will see Monetary Base data alongside 10-year supply.

Indonesian headline and core inflation continued to diverge in January with the former falling below the bottom of Bank Indonesia’s 1.5-3.5% corridor, while core rose 0.1pp to 2.4%, 0.7pp higher than a year ago. BI cut rates 25bp in January with the next decision on February 19. IDR stability is likely to remain its focus and it will probably also look through the fall in headline and focus on core inflation as the former was impacted by government policy. 

Indonesia CPI y/y%

Source: MNI - Market News/Refinitiv

• The headline CPI fell 0.8% m/m non-seasonally adjusted bringing the annual rate down to 0.8% y/y from 1.6% in December. The sharp drop was due to a 8.75% y/y decline in utilities inflation, while transportation rose 0.8% y/y from -0.3% and food, drinks & tobacco increased 3.7% y/y up from 1.9%.
• Utilities fell 9.1% m/m in January due to a 50% discount on electricity rates for some customers.
• Personal care, education and household equipment drove the slight pick-up in underlying inflation.
• BI intervened to defend the rupiah today as a surge in the US dollar (BBDXY +1.2%) weighed on currencies regionally. It said that it was intervening to improve confidence and FX supply/demand. USDIDR is currently up 1% to 16460 today after a high of 16470.50 earlier.

Asian equities lower across the board today following Tariff headlines. Although it has been reported that China is planning to open discussions with Trump to avoid further escalation.

• Japan's Nikkei 225 and Topix declined 2.8% and 2.5%, respectively, as US tariffs heightened global growth concerns. Tech stocks were particularly weak, with Tokyo Electron, Nintendo, and KDDI among those under pressure ahead of earnings. However, Hitachi (+1.1%) bucked the trend after reporting stronger-than-expected Q3 results and raising its full-year profit forecast. Komatsu dropped 7.2%, the most since August, after mixed Q3 earnings signaled uncertain global demand.
• South Korea's Kospi Index fell 3%, as semiconductor stocks were hit hard. Samsung Electronics and SK Hynix both declined as AI-related stocks faced profit-taking. Investors are also concerned that US tariffs will hurt Korea’s export-driven economy, particularly in technology and automotive sectors.
• Taiwan's Taiex Index is 3.8% lower, with TSMC leading declines as the AI sector saw a broad selloff. Delta Electronics’ parent company fell 9.8% in Taiwan, its largest drop since August 5, amid worries about its exposure to Mexico, where it has significant manufacturing operations. AI hardware names also suffered, with Wiwynn, Quanta, and Asia Vital hitting limit down on concerns that US tariffs could disrupt supply chains. PC makers like Asus (+5.4%) and Acer (+2.6%) outperformed, as they are expected to benefit from increased AI adoption.
• In Hong Kong the Hang Seng Index fell is 0.7%, paring deeper losses after reports that China is planning to open discussions with Trump to avoid further tariff escalation. Offshore yuan stabilized, signaling potential intervention. Alibaba surged 5%, its highest since Nov. 12, after revealing an AI model that outperformed Meta’s Llama and DeepSeek V3. Macau casino stocks declined after January gaming revenue missed estimates, but analysts remain focused on Lunar New Year performance, which could still show strength. CK Hutchison (-2.6%) hit its lowest since July 11, with further pressure on shipping and infrastructure stocks tied to the Panama Canal, after the US Secretary of State urged Panama to remove Chinese companies near key trade routes. Mainland markets remain closed for the Lunar New Year and will reopen on Wednesday.
• Australia's ASX 200 fell 1.9%, with mining stocks underperforming amid concerns that US tariffs on Canada, Mexico, and China could dampen global economic growth and weaken commodity demand. Westgold Resources plunged 14% after cutting its gold production forecast. In New Zealand, the NZX 50 dropped 1.4%, led by Fisher & Paykel Healthcare, which saw its biggest one-day decline since 2020 after warning of potential cost increases due to tariffs.