Asian stocks rise on soft US CPI, AI earnings rally
- Asian shares gain as softer US inflation data reinforced expectations for a more accommodative Fed policy.
- Strong earnings from major tech firms renewed confidence in sustained AI infrastructure spending.
- Major Asian indices posted solid gains, led by sharp rallies in South Korean chipmakers.
Asian stocks mostly remain stronger, bolstered by softer US inflation data that reinforced expectations for a more accommodative Federal Reserve (Fed) policy. US headline CPI rose 3.4% year-over-year in July, down slightly from 3.5% in the previous month. Core CPI, which strips out volatile food and energy prices, rose 2.5% year-over-year compared to 2.6% in June. Both figures landed right in line with market forecasts.
According to the CME FedWatch tool, interest-rate swaps are now pricing in roughly a 40.1% chance of a rate hike in September. Odds for an October increase dropped to around 60% from 75% the prior day, with the next potential rate hike not fully priced in until December.
Investor appetite for technology shares continued its recovery following last month’s sharp selloff. This rebound was driven by strong earnings from major tech companies, which reinforced confidence in sustained spending on AI infrastructure and provided growing evidence that AI adoption is expanding across a wider range of applications. Asian markets reflected this positive momentum, led by strong gains in Japan and South Korea.
Japan’s Nikkei 225 Index rises 1.63% to clear 68,600, supported by domestic producer prices rising 7.2% in July, easing slightly from 7.3% in June and coming in below forecasts of 7.4%. Meanwhile, South Korea’s KOSPI surges nearly 4.22% to above 6,850 as major chipmakers rallied following an overnight rise in US tech stocks. Samsung Electronics gained nearly 5%, while SK Hynix jumped over 9%, driven by renewed optimism over AI-related demand across the semiconductor sector.
Sovereign wealth fund interest underpins Korea tech sentiment
BNY’s Wee Khoon Chong notes that improving risk appetite in regional markets is being reinforced by flows into technology, with “reports that regional sovereign wealth funds may invest in South Korean technology companies” providing an additional boost to sentiment and helping validate the recent optimism around Korea’s tech complex.
Markets in Greater China also joined the broader AI-driven rally, though with varying degrees of momentum. China’s Shanghai Composite advances 0.40% to 3,960, and the Shenzhen Component climbs 0.73% to 14,520. Domestic attention remained firmly on Semiconductor Manufacturing International Corp. ahead of its earnings report later on Thursday, where net profit was expected to more than double year-over-year. In contrast, Hong Kong’s Hang Seng Index edges up just 0.04% to trade around 25,450. Investors continued to weigh geopolitical risks and digest Tencent's second-quarter earnings while closely monitoring developments in China's AI sector.
Asian stocks 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.
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