EM ASIA CREDIT: POSCO Holdings (POHANG, Baa1/A-/NR) up on Korea tariff plans

Further outflows in Asian on Tuesday, although below the short term averages. India continues to see heavy outflows marking 12 straight sessions and a total outflow of $5.4b so far this year

• South Korea: Saw outflows of -$159m yesterday, contributing to a 5-day total of -$216m. YTD flows are negative at -$216m. The 5-day average is -$43m, slightly worse than the 20-day average of $0m but better than the 100-day average of -$157m.
• Taiwan: Saw outflows of -$27m yesterday, leading to a 5-day total of +$768m. YTD flows are negative at -$1.8b. The 5-day average is +$154m, better than the 20-day average of -$78m and the 100-day average of -$119m.
• India: Recorded significant outflows of -$430m yesterday, resulting in a 5-day total of -$2.76b. YTD flows are deeply negative at -$5.38b. The 5-day average is -$551m, worse than the 20-day average of -$326m and the 100-day average of -$82m.
• Indonesia: Saw outflows of -$24m yesterday, bringing the 5-day total to +$37m. YTD flows are negative at -$207m. The 5-day average is +$7m, better than the 20-day average of -$12m and equal to the 100-day average of $0m.
• Thailand: Saw inflows of +$5m yesterday, contributing to a 5-day total of -$82m. YTD flows are negative at -$204m. The 5-day average is -$16m, worse than the 20-day average of -$9m and in line with the 100-day average of -$9m.
• Malaysia: Recorded outflows of -$5m yesterday, leading to a 5-day total of -$204m. YTD flows are negative at -$465m. The 5-day average is -$41m, worse than the 20-day average of -$25m and the 100-day average of -$19m.
• Philippines: Saw outflows of -$3m yesterday, bringing the 5-day total to -$34m. YTD flows are negative at -$86m. The 5-day average is -$7m, slightly worse than the 20-day average of -$6m and the 100-day average of -$1m.

Table 1: EM Asia Equity Flows

USD/CNH is holding near 7.2750, a little off earlier session highs (7.2831). Upside focus may rest on Tuesday intra-session highs (7.2965). Before this we have the 50-day EMA close to 7.2870. Yesterday's lows were at 7.2524. 

• CNH sentiment has been weighed by earlier remarks from US President Trump, which threatened a 10% tariff on China due to fentanyl flows from the country (per BBG). Trump mentioned a possible Feb 1 date, although he was also discussing that date in the context of tariffs on Mexico and Canada, which was also the date mentioned yesterday in his press conference.
• Broader yuan sentiment had firmed in recent sessions as Trump's inauguration came and passed without any early tariff action. This also follows the release of the America First Trade Policy document from the White House, earlier this week (see this link). This pointed to the start of April in terms of reporting on various issues back to Trump and suggests it could be some time before fresh trade action is launched, at face value in any case.
• USD/CNH implied vols have ticked higher but are still well off recent highs, the 1 week at 5.43%, the 1 month at 5.41%. 

The Westpac lead index for December fell 0.02% m/m after rising 0.06% leaving the 6-month annualised rate slightly slower at 0.25% from 0.33%. This measure leads growth relative to trend by 3 to 9 months and it was positive throughout Q4 signalling some improvement in growth over H1 2025. Westpac expects GDP growth to reach 2.2% y/y by end-2025 but the first rate cut not until May.

• The improvement in the index from mid-last year has been driven by better consumer confidence, commodity prices in AUD, stronger equities and turnaround in dwelling approvals. The outlook for commodities and markets in 2025 is highly uncertain thus risking the pickup in the Westpac lead index.
• The market has almost 75bp of rate cuts priced in by year end which should support the economy-related variables in the index but the timing continues to be data-dependent and unclear.
• Westpac says that “the more positive growth signal still looks fairly tentative”, but the RBA will want to see signs of the labour market easing, whereas it stabilised in H2 2024 and some indicators even tightened, such as underemployment. It notes that there is still a chance of a February or April easing if core inflation moderates significantly more than expected.

Australia Westpac lead index vs real GDP %