JAPAN: Japan Buys Foreign Bonds After Major Central Bank Decisions
The weekly international security flow data from the Japanese MoF revealed that Japanese investors broke a two-week streak of net sales of foreign bonds, with net purchases topping Y1tn last week as Japanese (and global) investors (rightly or wrongly) focused on the ending points for the current tightening cycles across the major global central banks in lieu of the latest Fed, ECB & BoE meetings.
- Elsewhere, Japanese investors shed foreign equities for a second straight week, although the net sale size wasn’t particularly notable.
- International investors were small net buyers of Japanese bonds, while they were incremental net sellers of Japanese equities.
| Latest Week | Previous Week | 4-Week Rolling Sum | |
| Net Weekly Japanese Flows Into Foreign Bonds (Ybn) | 1127.5 | -713.1 | 1311.0 |
| Net Weekly Japanese Flows Into Foreign Stocks (Ybn) | -543.5 | -100.4 | 117.9 |
| Net Weekly Foreign Flows Into Japanese Bonds (Ybn) | 231.4 | 4.4 | -3791.3 |
| Net Weekly Foreign Flows Into Japanese Stocks (Ybn) | -18.6 | 379.5 | 462.3 |
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JGB TECHS: (H3) Shallow Bounce Off Lows
- RES 3: 151.13 - High Mar 3
- RES 2: 149.75/150.81 - High Nov 11 / High Aug 5
- RES 1: 147.64/148.79 Low Dec 6 / High Nov 16
- PRICE: 146.14 @ 15:30 GMT Jan 06
- SUP 1: 145.17 - Low Jan 2
- SUP 2: 145.05 - Low Jun 16 and a key support
- SUP 3: 144.61 - 1.50 proj of the Aug - Oct - Nov price swing
Despite the clear bear cycle, prices posted a shallow bounce into the Friday close amid a global fixed income rally. Markets have managed a low print of 145.17 as part of the recent downtrend, and further weakness would confirm a resumption of the downtrend and open a key support that sits at 145.05, the Jun 16 low. Clearance of this level would strengthen the bearish condition. Key resistance has been defined at 148.79, the Nov 16 high.
JGBS: Assessing Developments From The Long Weekend
Tokyo returns from the elongated weekend after the final overnight session of last week saw JGB futures extend on their Tokyo bid in lieu of soft wage and ISM services data out of the U.S. That left the contract +25 at the close of post-Tokyo trade.
- Since then, we have seen some light richening in U.S. Tsys, which, when coupled with domestic participants reacting to Friday’s post-payrolls/ISM move in wider core global FI markets, may lend support to the space.
- Countering that has been a firmer than expected core Tokyo CPI release, which hit +4.0% Y/Y, with the core-core measure ticking up to 2.7%, in line with exp., although household spending was softer than expected, falling Y/Y.
- Also note that the weekend saw PM Kishida flag that his gov’t and the BoJ must discuss their relationship when it comes to guiding economic policy after he names a new BoJ Governor. Kishida also highlighted the need for clear communication with the markets re: monetary policy.
- The local docket is thin for the remainder of the session, which will leave local participant reaction to the aforementioned news flow at the fore.
KRW: Won Outperformance Persists On Equity Rebound/Strong Portfolio Inflows
The 1 month NDF got just below 1234 in NY trading before recovering into the close near 1239. The 1234 region coincides with lows in the pair from late May in 2022. Onshore spot ended yesterday's session at 1243.85, a gain of 2% against the USD, while the 1 month NDF rose 1.17%.
- Won gains may have been tempered by a loss of momentum in the equity space through the NY session. Still, the SOX and MSCI IT index outperformed broader market moves. To recap, the Kospi rose 2.63% yesterday, with offshore investors adding $548.77mn to local stocks.
- This brings net inflows for the past 5 sessions to an impressive $1.4bn, although over the past month, net inflow momentum is still below peaks we saw in 2022, see the chart below.
- On the data front, the BoP goods balance remain in deficit in Nov, -$1.567bn, while the current account slipped back into deficit -$621.7mn (from $883.4mn). Given the dated nature of this data it is unlikely to have a large impact on market sentiment today.
Fig 1: South Korea Net Equity Inflow Momentum Starting Off 2023 Strongly
Source: MNI - Market News/Bloomberg
