ASIA FX: CNH Only Modestly Higher, Despite Onshore Equity Surge

Chinese and Hong Kong equities saw mixed moves today, with AI-related stocks continuing their rally, while pressure mounted on consumer and healthcare sectors. DeepSeek's AI-driven surge remains a key bullish driver, with Morgan Stanley, JPMorgan, and UBS expressing optimism that the rally is far from over. The MSCI China Index has now gained 15% from its January low, supported by increased global investor interest in the nation’s tech sector.

• Medical equipment stocks surged after Citigroup turned constructive on the sector, citing market share gains from foreign brands and long-term fundamentals. MicroPort MedBot (+8.5%), MicroPort Scientific (+5.7%), and Inkon Life (+7.7%) led the advance, with Citi highlighting potential stimulus measures at next month’s Two Sessions as a further catalyst.
• Meituan tumbled as much as 6.1% after JD.com announced it would waive annual commissions for new restaurant partners, intensifying competition in the food delivery sector. JD.com shares rose 2%, while Alibaba share surged almost 7%. The HStech Index tracked Alibaba higher, however has since given back about half of the mornings gains to trade 1.30% higher at the break.
• Key equity benchmarks: HSI is +1.56%, HS Property Index +2.15%, HS China Enterprise Index +1.50% while China Mainland equities underperform with the CSI 300 -0.10%.
• Overall, sentiment remains strong for AI and tech stocks, while consumer and platform businesses face increasing pressure from competition and regulatory concerns.

NZGBs closed in the middle of today’s ranges, with benchmark yields 3-4bps higher.  

• The NZGB 10-year outperformed its ACGB counterpart, with the AU-US yield differential 3bps tighter at +9bps. The NZ-US 10-year differential was unchanged at +1bp.
• Cash US tsys are ~1bp cheaper in today’s Asia-Pac session after yesterday’s modest sell-off. The focus is on key US CPI inflation data today at 0830ET.
• (MNI) Consensus sees core CPI inflation accelerating to a seasonally adjusted 0.3% M/M (unrounded 0.29%) in January after what was, for now, seen as a slightly softer-than-expected 0.225% M/M in December.
• The headline is expected only a touch stronger, at 0.32% M/M for a pullback from 0.39% owing to a sequential slowing in energy prices vs stronger food prices amidst a serious bird flu outbreak.
• There’s a good chance core CPI ‘surprises’ a tenth higher with 3.2% Y/Y owing to rounding, whilst headline CPI is widely expected to print 2.9% Y/Y.
• Swap rates closed 4-8bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing is unchanged. 49bps of easing is priced for February, with a cumulative 121bps by November 2025.
• Tomorrow, the local calendar will see Card Spending and 2Yr Inflation Expectations data. 

USD/JPY sits just off session highs in latest dealings, sitting close to 153.55/60. There is reasonable option expiries for NY cut later, 153.50-70($1.7bln), which may be influencing spot trends. A clean break higher could see 154.00 targeted, above which lies the 50-day EMA. 

• Yen is off around 0.70% versus the USD, comfortably the worst G10 FX performer against the USD, with the bias towards higher beta skewed slightly higher. 
• So far today, per DTCC, USD/JPY options volumes are just under $2bn, although this isn't beyond what we should normally expect. This is around 35% of total FX options volumes (per DTCC).
• The larger volume options transactions are skewed towards lower strikes levels compared with current spot and are mostly against the USD. 152.00, 152.50 have traded, with 19 Feb expiries. Longer dated expiries, with strikes at 150.05 and lower have also traded.
• USD/JPY risk reversals are mostly following spot direction. The 1 month is back to -1.22, against recent lows of -1.61. 1 month implied vol is a touch higher, but near 10% is well off 2024 cycle highs.
• JPY futures volumes sit off earlier highs, but again remain within recent norms. Open interest continues to climb though.