Asian stocks advance with Nikkei 225 hovers near record highs
- Asian stocks appreciate as US inflation data reinforced expectations for a Fed rate cut in September.
- Japan’s Nikkei 225 climbs 1.33% to surpass 43,300, remaining close to its record highs.
- Chinese equities gained as the US extended the implementation of sweeping tariffs on China.
Asian stocks rise on Wednesday after Wall Street’s overnight rally, following United States (US) inflation data that strengthened expectations for a US Federal Reserve rate cut in September. Markets are now pricing in approximately 94% odds of a Fed rate cut at the September meeting, up from 86% a day ago, according to the CME FedWatch tool.
Japan’s Nikkei 225 rises 1.33% to above 43,300, hovering near all-time highs. China’s Shanghai Composite climbs 0.23% to close at 3,670, while the Shenzhen Component advances 0.66% to above 11,400. Hong Kong’s Hang Seng appreciates 1.19% to above 25,300, hitting two-week highs. South Korea’s KOSPI advances 0.58% to near 3,200.
Market sentiment improves in Japan after a trade agreement with Washington. Additionally, further BoJ policy normalization could be delayed due to domestic political uncertainty, concerns about the negative economic impact of higher US tariffs.
Chinese equities gained on news of an extended trade truce with the US, avoiding the imposition of triple-digit tariffs on Chinese exports. The Trump administration postponed the implementation of sweeping tariffs on China for an additional 90 days. China also decided to suspend additional tariffs on US goods for the same period, following Trump’s executive order extending the tariff truce.
Beijing introduced a year-long program offering interest subsidies on personal consumer loans, with 90% of the costs covered by the central government and the remaining 10% by provincial authorities, aiming to stimulate household spending.
In South Korea, big firms like Samsung Electronics, SK Hynix partnered with KAI in the K-Humanoid Alliance, a state-led initiative aimed at developing humanoid robotics for aerospace manufacturing by 2030. Also, the nation’s unemployment rate fell to 2.5% in July, marking a second consecutive monthly decline.
AsianStocks FAQs
Asia contributes around 70% of global economic growth and hosts several key stock market indices. Among the region’s developed economies, the Japanese Nikkei – which represents 225 companies on the Tokyo stock exchange – and the South Korean Kospi stand out. China has three important indices: the Hong Kong Hang Seng, the Shanghai Composite and the Shenzhen Composite. As a big emerging economy, Indian equities are also catching the attention of investors, who increasingly invest in companies in the Sensex and Nifty indices.
Asia’s main economies are different, and each has specific sectors to pay attention to. Technology companies dominate in indices in Japan, South Korea, and increasingly, China. Financial services are leading stock markets such as Hong Kong or Singapore, considered key hubs for the sector. Manufacturing is also big in China and Japan, with a strong focus on automobile production or electronics. The growing middle class in countries like China and India is also giving more and more prominence to companies focused on retail and e-commerce.
Many different factors drive Asian stock market indices, but the main factor behind their performance is the aggregate results of the component companies revealed in their quarterly and annual earnings reports. The economic fundamentals of each country, as well as their central bank decisions or their government’s fiscal policies, are also important factors. More broadly, political stability, technological progress or the rule of law can also impact equity markets. The performance of US equity indices is also a factor as, more often than not, Asian markets take the lead from Wall Street stocks overnight. Finally, the broader risk sentiment in markets also plays a role as equities are considered a risky investment compared to other investment options such as fixed-income securities.
Investing in equities is risky by itself, but investing in Asian stocks comes along with region-specific risks to be taken into account. Asian countries have a wide range of political systems, from full democracies to dictatorships, so their political stability, transparency, rule of law or corporate governance requirements may diverge considerably. Geopolitical events such as trade disputes or territorial conflicts can lead to volatility in stock markets, as can natural disasters. Moreover, currency fluctuations can also have an impact on the valuation of Asian stock markets. This is particularly true in export-oriented economies, which tend to suffer from a stronger currency and benefit from a weaker one as their products become cheaper abroad.