Asian Stocks Rise as Focus Shifts to Fed’s Interest Rate Decision; Hong Kong Leads Gains

Most Asian markets advanced on Friday as investor attention turned to the Federal Reserve’s upcoming interest rate decision, potentially marking the first rate cut in over four years. Hong Kong’s markets led the region with strong gains, driven by bargain hunting in local technology heavyweights.

Hong Kong Rallies on Tech Stocks, China Markets Flat

Hong Kong’s Hang Seng index was the standout performer, continuing its rebound for a third straight session as investors bought into undervalued internet stocks. In contrast, Chinese markets showed limited movement, with the Shanghai Shenzhen CSI 300 and Shanghai Composite rising only slightly from their seven-month lows earlier this week.

China’s markets remained under pressure due to a string of lackluster economic data for August and concerns over potential new U.S. trade restrictions.

Japanese Markets Lag Amid Inflation Concerns and BOJ Speculation

Japan’s Nikkei 225 and TOPIX indices fell by about 0.9%, trailing behind their regional counterparts. Japanese stocks experienced volatility throughout the week as investors grappled with weak inflation signals and hawkish comments from Bank of Japan (BOJ) officials, suggesting potential future rate hikes. However, softer-than-expected producer price inflation cast doubt on the likelihood of immediate tightening.

With the BOJ scheduled to meet next week, uncertainty looms over the bank’s next move, while Japan’s consumer inflation data, also due next week, is expected to offer further insights.

Broader Markets Mixed as Speculation Over Fed Rate Cut Intensifies

Across the region, markets were mixed as speculation mounted over whether the Federal Reserve will cut rates by 25 or 50 basis points (bps) next week. Despite strong inflation data supporting the case for a smaller cut, signs of a weakening labor market reignited discussions of a more aggressive 50 bps cut. According to the CME Fedwatch tool, traders are pricing in a 56% chance for a 25 bps cut and a 44% chance for a 50 bps cut.

Elsewhere, Australia’s ASX 200 rose 0.3%, while South Korea’s KOSPI slipped 0.3%. Futures for India’s Nifty 50 index indicated a slightly negative opening after reaching a record high on Thursday, with Indian stocks continuing to outperform their global peers amid strong growth prospects for the country.