CHINA: USD/CNY Fixing Steady, Fixing Error Narrows

• Investors pulled out $1.4b from the broad iShares MSCI Emerging Markets ETF (EEM) in January, the largest outflow since August, as traders focused on country-specific bets amid Trump-driven policy uncertainty.
• The iShares MSCI Mexico ETF (EWW) saw $309m in inflows, benefiting from delayed US tariffs and a more dovish Fed stance on inflation. However, some inflows may reflect short-selling activity, as short interest in EWW hit a one-year high.
• The iShares MSCI India ETF saw $796m in outflows, the largest since March 2020, amid concerns over slowing economic growth (forecasted at 6.3%-6.8%).
• China/Hong Kong saw $160m in inflows, mainly driven by the KraneShares CSI China Internet ETF.
• Additionally, broad stock ETFs saw $42.5m in inflows, while EM bond funds had $101.8m in outflows, bringing total EM ETF assets down slightly to $347.1b.

Asian equities are rebounding this morning as investor sentiment improved following the US decision to delay tariffs on Mexico and Canada, it is a quiet session in the region for economic data with investors largely just watching headlines out of the US.  

• South Korea's KOSPI rose 1.6%, led by a recovery in tech and auto exporters, after Monday’s sharp losses. Samsung (+3.5%) and Hyundai (+2.2%) were key drivers, though EV battery stocks fell following weak earnings from LG Chem and Posco Holdings. Foreign funds remained net sellers.
• Japan's Nikkei 225 climbed 1.5%, while the Topix rose 1.3%, as electronics and automakers bounced back. Toyota (+3%) was the top contributor, benefiting from easing trade war concerns and stronger US manufacturing data.
• Australia's ASX200 is 0.50% higher while Hong Kong futures signaled gains. US futures also rose after the S&P 500 pared losses overnight, last trading 0.42% higher.

Q4 labour market data are released on February 5 and Bloomberg consensus expectations are in line with the RBNZ’s November forecasts. The unemployment rate is projected to rise 0.3pp to 5.1%, employment fall 0.2% q/q and private wages rise 0.6% q/q. An outcome close to this is unlikely to derail another 50bp of easing on February 19. It would have to print significantly better than expected for a smaller move and given the weakness of activity that seems unlikely. 

• Unemployment rate forecasts are between 4.9% and 5.3% with the RBNZ expecting 5.1%. The major local banks are all at 5.1% except for Westpac at 5.0%.
• Employment projections are between +0.1% q/q and -0.2% q/q with only three out of 15 analysts expecting it not to fall on the quarter. It is widely forecast to fall around 0.9% y/y. The RBNZ was slightly weaker in November projecting -0.3% q/q and -1.0% y/y. Jobs fell 0.5% q/q & 0.4% y/y in Q3.
• Private wages growth is expected to rise 0.6% q/q again with forecasts between 0.4% and 0.8%. The RBNZ is slightly lower at 0.5% as are ASB and ANZ. Kiwibank and Westpac are in line with consensus while BNZ is higher projecting 0.7%.