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Most Asian stock markets saw gains on Friday, buoyed by a recovery in technology shares after several sessions of declines. Despite the uptick, regional indices were still on track for significant weekly losses, influenced by recent underperformance in the technology sector and mixed signals from global markets.
Technology Sector Leads Recovery
Asian tech-heavy indices led the recovery, with South Korea’s KOSPI rising by 0.9%, Hong Kong’s Hang Seng Index climbing 0.7%, and Japan’s Nikkei 225 gaining 0.5%. These indices had been weighed down by profit-taking and a rotation into more economically sensitive sectors. The week’s losses ranged from 1.8% to 5.2%, with the Nikkei suffering the most, shedding over 5%.
Despite the stabilization, the technology sector remained under pressure from recent earnings disappointments from major U.S. tech firms, which had set a negative tone globally. However, U.S. stock index futures showed gains during Asian trading hours, suggesting a potential rebound.
Taiwan’s TSMC an Outlier
Taiwan Semiconductor Manufacturing Company (TSMC) saw its shares drop nearly 7% in Taipei, standing out as a major decliner. The company’s shares were catching up after a two-day market closure due to Typhoon Gaemi.
Japanese Markets Face Uncertainty Ahead of BOJ Meeting
Japanese stocks were among the hardest hit this week, partly due to uncertainty ahead of the Bank of Japan’s (BOJ) upcoming meeting. Both the Nikkei and TOPIX indices dropped over 5% this week. The uncertainty was exacerbated by disappointing consumer price index data from Tokyo, which showed a sharp decline in core inflation for July. This could limit the BOJ’s ability to raise interest rates, leaving markets divided on the likelihood of a 10 basis point hike next week.
Chinese Stocks Lag Despite PBOC Rate Cuts
Chinese markets continued to lag, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indices both slightly down, remaining at five-month lows. The indices fell between 3% and 4% this week, despite the People’s Bank of China’s surprise interest rate cuts, which failed to provide significant support.
Australia and India Show Relative Strength
Australia’s ASX 200 index rose nearly 1%, and along with India’s Nifty 50, was the best performer in Asia this week, each recording a weekly decline of only 0.5%. These indices benefited from a rotation into more economically sensitive sectors, with investors positioning for potential lower interest rates. However, the Nifty 50 faced some profit-taking and negative sentiment following an increase in India’s capital gains tax rates announced in the 2024 union budget.
Despite these challenges, the Nifty 50 and the BSE Sensex 30 retained much of their gains from July, driven by optimism about India’s economic growth prospects.
