IDR: USD/IDR Firmer Ahead Of BI Decision, No Change Forecast But Close Call
Spot USD/IDR is firmer in the first part of Wednesday dealings, the pair last at 16350, up close 0.50%. Part of this may reflect catch up to Tuesday broader USD gains, but with the 1 month USD/IDR also up from end Tuesday NY levels, fresh USD demand appears evident so far today.
- For USD/IDR spot, recent highs have rested close to 16400, while on Feb 3 we spiked to 16471. We are above all key EMAs, with the 20-day back under 16300. The 50-day is further south close to 16185.
- Some nervousness may be creeping in ahead of the BI decision later. The BBG sell-side consensus is for no changed, but there are a number of economists forecasting a cut today. Our own bias is for no change, but we had a surprise earlier in the year with a cut, as BI's priorities shifted somewhat to economic growth.
- USD/IDR looks a little too elevated relative to real US yield levels, but is still showing a firm directional correlation. ID-US 10yr spreads are back to +222bps. We were above +250bps for much of Jan.
- Local equities are from recent lows, while offshore portfolio flows are less negative in recent sessions, but we have still seen outflows in Feb to date.
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BONDS: NZGBS: Subdued Session Ahead Of Q4 CPI On Wed
In local morning trade, NZGBs closed flat to 2bps cheaper, with a flatter curve, on a subdued day of trading with cash US tsys out for Martin L. King Day. US Tsy futures (TYH5) is trading at 108-15, -0-02+ from closing levels.
- Swap rates finished unchanged.
- RBNZ dated OIS pricing close flat to 4bps firmer. 46bps of easing is priced for February, with a cumulative 106bps by November 2025.
- Tomorrow, the local calendar will see the Performance Services Index and Card Spending data. The PSI rose to 49.5 in November, the highest since February.
- However, the focus of the week will be Wednesday’s Q4 CPI data which is forecast to show moderation in headline and non-tradeables inflation.
- Headline returned to the RBNZ’s 1-3% band in Q3 and is expected to ease 0.1pp to 2.1% y/y posting a 0.5% q/q rise in Q4. The RBNZ forecasted 0.4% q/q & 2.1% y/y in November. Non-tradeables are projected to rise 0.8% q/q which would result in the annual rate moderating to around 4.7% y/y from 4.9%.
- November net migration prints on Thursday. Initial readings have tended to be revised down over H2 2024 as immigration slows. The softening labour market has discouraged people moving to NZ and encouraged New Zealanders to shift to Australia.
ASIA STOCKS: China & Hong Kong Equities Rallies Follow Trump & Xi Jinping Call
China and Hong Kong equities are rallying, buoyed by optimism over improved US-China relations following a positive pre-inauguration call between Donald Trump and Xi Jinping. The CSI 300 Index rose as much as 1.2%, led by gains in tech stocks like Shengyi Technology (+8.9%) and Eoptolink Tech (+7.4%). In Hong Kong, the Hang Seng Index is 2.3% higher, while the Hang Seng Tech Index jumped 3.25%, with e-commerce giants JD.com (+5.8%) and Alibaba (+3%) driving the rally.
- The market also reacted to China leaving its loan prime rates unchanged, with the one-year rate at 3.1% and the five-year rate at 3.6%. Education shares advanced after government guidance promoting AI and stricter curriculum controls, with New Oriental Education & Technology rising 6%. Additionally, reports of re-lending facilities supporting A-share buybacks have boosted sentiment, benefiting privately-run firms.
- Traders aggressively bought call options on Chinese stock-linked ETFs like FXI and KWEB on Friday, driven by optimism over a positive Trump-Xi call signaling potential easing in trade tensions. This activity pushed one-month implied volatility on FXI to its highest since mid-December, with bullish bets also driving significant gains in both ETFs.
- Overall, the markets are balancing optimism with caution over potential trade tariffs under Trump's incoming administration.
CHINA PRESS: First-tier Housing Market Stabilises Further
China’s property market has shown recent signs of stabilisation, with home prices in first-tier cities trending upwards for three consecutive months and transaction volume remaining at a high level, Securities Daily reported, citing Zhang Bo, director at 58 Anjuke Real Estate Research Institute. Prices of new homes in tier-one cities rose by 0.2% m/m in December, compared to November’s 0.0%. Existing housing was 0.0%, up from the previous 0.1% decline. Major cities' real-estate markets are expected to boom after the Chinese New Year if authorities keep offering policy support, the newspaper said, citing Zhang.
