Markets continue to digest US tariff adjustments, TW overtakes CN in US exports

Asia Market Update: Markets continue to digest US tariff adjustments; TW overtakes CN in US exports; CN mainland returns; Trump’s State of the Union tonight; AU CPI tomorrow.

General trend and developments

-Kospi outperforms +2% and Nikkei +1% after yesterday’s holiday, outperforming as traders digesting recent US tariff news. Hang Seng underwhelms -2% even as Shanghai +1% - returning after extended Lunar New Year holidays.

-China LPR rates were maintained as expected and the PBOC set a weaker fix for the offshore Yuan, sending the market rate heading back towards 6.90 handle.

-China trade move on Japan as MOFCOM bans dual-use exports to 20 Japanese companies on national security grounds.

-Taiwan exports to the US have overtaken Chinese exports to the US for the first time since the early 1990’s, in a stunning reversal due to Pres Trump’s tariffs and insatiable demand for high-end semiconductor chips. US Commerce Dept data showed that Chinese imports into the US fell 44% y/y in Dec, 2025 to $21.1B, while Taiwanese imports into the US more than doubled to over $24.7B, mainly in high tech products. [Note that Taiwan’s population has only 23 million people, underscoring an incredible reversal in just one year. Taiwan govt itself has upgraded GDP for 2026 to 7.7%, a very high growth rate for an advanced economy].

-South Korea Consumer Confidence continued to even higher elevated levels, as PPI for Jan was in line.

-USD/JPY pushed back to Friday levels, prior to SCOTUS decision on tariffs, as Japan press finally confirmed US/JP officials considered joint FX intervention.

-Lingering tariff uncertainty (FedEx lawsuit; Japan Trade Min warns Japan could incur additional tariff costs on some items beyond the 15% agreed).

-Standard Chartered Q4 results were weak, ahead of HSBC FY25 results tomorrow.

-More consumer price hikes in Japan (Seven & I; McDonald’s Japan).

-AI litigation threats mount as 1) South Korea major TV networks said be suing OpenAI for unauthorised use of content in training ChatGPT, 2) Trump Admin believes China’s Deepseek used Nvidia's most advanced AI chip to train its latest and 3) Anthropic alleges that China's DeepSeek, MiniMax, and Moonshot AI utilized Claude to improve competing products.

-Japan MOF said to be considering ‘tweaking’ of liquidity support JGB auctions from April due to ‘persistent volatility’.

-Japan parliament expected to name two new BOJ nominees tomorrow, to replace Noguchi and Nakagawa.

-Pres Trump to deliver his 2026 State of the Union address at the US Capitol tomorrow night at 9pm ET. [WSJ reports it will emphasize idea of American exceptionalism, and expected to announce measures to 'lower costs'].

-BItcoin and ETH down again $63K / $1,823, Silver -3%.

-Australia Jan CPI and Retailer Woolworths to report tomorrow.

-US equity FUTs +0.3% to +0.5% during Asia trading.

Looking ahead (Asian-weighted focus, using Asian time zone)

-Wed Feb 25th AU Jan CPI; TH BOT Rate Decision;

-Thu Feb 26th NZ Feb Business Confidence; KR BOK Rate Decision, BOJ Takata speech;

-Fri Feb 27th JP Jan Ind Prod & Retail Sales, IN Q4 GDP, (Fri night Jan US PPI).

Holidays in Asia this week

-Mon Feb 23rd China, Japan.

-Feb 27th Taiwan.

Headlines/economic data

Australia/New Zealand

-ASX 200 opens +0.2% at 9,943.

- Australia Trade Min Farrell to travel to US this week - financial press.

-Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 80.2 v 77.1 prior (update).

-Australia sells A$1.2B v A$1.2B indicated in Mar 2036 Bonds: Avg Yield: 4.6969%; bid-to-cover: 2.71x.

China/Hong Kong

-Hang Seng opens -0.6% at 26,913; Shanghai Composite reopens +1.2% at 4,129 (first trading day after extended Lunar New Year holidays)

-CHINA PBOC MONTHLY LOAN PRIME RATE (LPR) SETTING: LEAVES RATES UNCHANGED, AS EXPECTED.

-China press said to 'flag' the resilience of the Chinese Yuan (CNY).

-China MOFCOM: Bans dual-use exports to 20 Japanese companies on national security grounds; Adds the companies to Export Control List

-Trump Administration said to believe the co. used Nvidia's most advanced AI chip to train its latest model; cites a US official - financial press

-China MOF sells 3-year and 10-year bonds.

-Anthropic alleges that China's DeepSeek, MiniMax, and Moonshot AI utilized Claude to improve competing products, such products could be made more quickly and cheaply - WSJ [overnight update].

-(DE) German Chancellor Merz to visit China between Feb 25-26th - press [overnight update].

-China PBOC sets Yuan reference rate: 6.9414 v 6.9398 prior (first fix for 6 trading days due to Lunar New Year holidays).

-China PBOC Open Market Operation (OMO): Injects CNY526B in 7-day Reverse Repos; Net drains CNY926B v injects CNY114B prior (first OMO ops since start of extended Lunar New Year holidays).

Japan

-Nikkei 225 opens -0.1% at 56,764.

-JAPAN MOF SAID TO BE CONSIDERING "TWEAKING" OF LIQUIDITY SUPPORT JGB AUCTIONS AS "VOLATILITY PERSISTS"; the move would be effective from Apr - financial press, citing sources.

- Jan FX rate check was initiated by US Treasury Sec Bessent - Nikkei.

-Japan Trade Min Akazawa: Japan's US-bound investment deal not disadvantageous for Japan, will work closely with US on each agreed project

- Japan Fin Min Katayama: Will closely examine details of US Supreme Court decision on tariffs - financial press.

- Japan govt: Phone conversation was held between Japan Trade Min Akazawa and US Commerce Sec Lutnick; both sides affirmed investment plans in call [follows recent US Supreme Court ruling on the Trump tariffs].

Korea

-Kospi opens +0.1% at 5,853.

-South Korea Feb Consumer Confidence: 112.1 v 110.8 prior.

- South Korea Jan PPI Y/Y: 1.9% v 1.9% prior.

-South Korea major TV networks said be suing OpenAI for unauthorized use of content in training ChatGPT (update).

-South Korea BOK Gov Rhee: FX market conditions have improved, but (still) need to be stabilized - press [overnight update].

Other Asia

-Taiwan Vice Premier: Preferential terms reached with the US in trade deal will not change - financial press.

-Malaysia PM Anwar: US-Malaysia trade agreement not yet ratified - financial press.

- India RBI seen selling dollars to support Rupee vs USD and protect 91 level.

North Americ

-Pres Trump's State of the Union said to 'emphasize idea of American exceptionalism, expected to announce measures to 'lower costs' - WSJ ,citing officials.

-Apple: To move some Mac Mini production from Asia to Houston, USA - WSJ, citing COO Khan.

-Reportedly Pentagon chief Hegseth to meet with Anthropic CEO - Axios.

-(US) Follow Up: US Customs posts notice on tariff guidance under section 122.

- House Speaker Johnson (R): Congress and the White House will find a new path for tariffs in the coming weeks - X post.

- (US) DEC FACTORY ORDERS: -0.7% V -0.6%E.

- (US) DEC FINAL DURABLE GOODS ORDERS: -1.4% V -1.4%E; DURABLES (EX-TRANSPORTATION): 1.0% V 0.9%E.

- (US) FEB DALLAS FED MANUFACTURING ACTIVITY: +0.2 V -0.8E.

Europe

- (IR) US Envoys Witkoff and Kushner plan for US-Iran talks in Geneva on Thurs - press.

-(IR) Iran is reportedly planning terror attacks on US targets in Europe and the Middle East according to Western and American security officials - UK press.

- (IT) Italy Jan Final CPI M/M: 0.4% v 0.4%e; Y/Y: 1.0% v 1.0%e; CPI EU Harmonized M/M: -1.0% v -1.0%e; Y/Y: 1.0% v 1.0%e.

- (DE) GERMANY FEB IFO BUSINESS CLIMATE: 88.6 V 88.3E; Current Assessment: 86.7 v 86.2e; Expectations Survey: 90.5 v 90.0e.

- German Chancellor Merz is reelected as CDU Chair with 91% backing his tenure - press.

- Hungary blocks €90B loan to Ukraine until oil flow resumes - press.

Levels as of 00:20 ET

Nikkei 225 +1.0%; ASX 200 flat; Hang Seng -2.0%; Shanghai Composite +1.1%; Kospi +2.1%;.

Equity S&P500 Futures +0.3%; Nasdaq100 +0.5%; DAX +0.3%; FTSE100 -0.1%.

EUR 1.1768-1.1797; JPY 154.53-155.31; AUD 0.7048-0.7054; NZD 0.5950.5972.

Gold -1.0% at $5,172/oz; BTC -2.5% at $63,522, Crude Oil +0.6% at $66.69/bbl; Copper +1.4% at $5.9280/lb.