IDR: Rupiah Rides on Regional Rally

• China's bond futures are all up on Monday following modest injection of liquidity during this morning's OMO.  
• The 10-Yr is up +0.06 to 108.31 and is at the mid-point between the 20-day EMA of 108.18 and the 200-day EMA of 108.38.
• The 2-Yr is up +0.01 to 102.41 maintaining it's position at the midpoint between the 20-day EMA of 102.40 and the 100-day EMA of 102.42.  There is a sizeable maturity schedule ahead this week for 7-day reverse repo and the PBOC decisions on liquidity are the likely catalyst for the next move in bonds.  
• The CGB 2-Yr is at 1.42% and the 10-Yr at 1.81%

The Crypto community is pointing to an update made by MSCI on the 10th October stating that they would be reviewing how to classify companies whose main business involves accumulating Bitcoin or digital assets. Basically asking the question, are these Treasuries just an index fund ? Their final decision comes on 15 January 2026 and policy will go into effect February 2026. The market will pay very close to this decision as it could have huge short-term ramifications for those “Bitcoin Treasuries" that have been funding purchases through high yield loans together with preferred and common stock offerings. A post on X by Bull Theory broke it down as follows:

• “MSCI Key Proposal: If digital assets = 50% or more of a company’s total assets and the company’s operating activity resembles a digital asset treasury. That company can be excluded from MSCI global indexes. This directly puts several Bitcoin-heavy companies at risk, especially MicroStrategy.”
• “Why this matters, If MSCI excludes these companies: Index funds are forced to sell. Funds tracking MSCI indices must remove these stocks. They do not get to choose. This is literal forced institutional selling.
• “If MSTR is labeled fund-like, MSCI indexed funds could be forced to reduce or exit positions. When MSTR dumps → BTC reacts immediately. Like it or not, $MSTR is treated as a leveraged Bitcoin proxy.”
• Michael Saylor responded publicly on Saturday on X,"MicroStrategy is not a fund, not a trust, not a holding company. It is a publicly traded operating company with a $500M software business and a Bitcoin based treasury strategy." https://x.com/saylor/status/1991875241107222701?s=20
• “His message was simple: "We are not passive holders. We are builders. We are innovating. Index labels do not define us."
• Time will tell if the MSCI agrees with him.

Japan/China tensions, over recent remarks made by Japan PM Takaichi, showed no signs of de-escalating over the weekend. Economically, Japan has more to lose relative to China, in terms of potential loss of export and tourism related flows. 

• Via BBG: " Chinese Foreign Minister Wang Yi says Japanese Prime Minister Sanae Takaichi’s comments on Taiwan crossed a “red line” and China must “resolutely hit back” to safeguard its sovereignty and territorial integrity. While from the Japan side: "A Japanese official called China's claims that Japan's position on a Taiwan crisis has changed "entirely baseless" and called for more dialogue." (also via BBG).
• There were also weekend reports that China had declined to attend a trilateral summit in January, between China, Japan and South Korea, which was due to be held in Japan.
• The chart below plots Japan's exports to China, along with tourism arrivals from China, with both presented as a % share of total. By way of comparison, Japan's exports to the US are around 20% (% of total) and China's to Japan sit at around 5% of China's exports.
• Japan's manufacturing sector relies on imports of critical minerals from China, which the latter has restricted. This action was criticised at the weekend's G20 meeting, while China announced a global project to "promote mutually beneficial cooperation and peaceful use of key minerals" and "safeguard the interest of developing countries" (BBG), which doesn't include Japan.  

Fig 1: Japan Export Shares & Tourism Arrivals, % Share From China 

Source: Bloomberg Finance L.P./MNI