- Asian equities extend the rally on Friday as the US job data helped ease concerns about the labor market.
- The recent US employment market report eased fears of a US recession.
- The hotter Chinese CPI inflation boosts the Asian markets, with the Hang Seng Index leading gains.
Most of Asian stock markets trade in positive territory on Friday, bolstered by positive US Initial Jobless Claims and hotter-than-expected Chinese Consumer Price Index (CPI) inflation data.
The recent US Initial Jobless Claims released on Thursday ease some fears about the US labor market. The US Department of Labor (DoL) on Thursday reported that the number of Americans filing new applications for unemployment benefits rose by 233K for the week ending August 3, compared to the previous week of 250K (revised from 249K), below the market consensus of 240K.
The China’s Shanghai Composite was up 0.12% to 2,875. Meanwhile, the Shenzhen Component increased by 0.06% to 8,450, and the Hang Seng Index rose by 1.77% to 17,120. Chinese CPI inflation jumped faster than expected in July, rising to 0.5% YoY from 0.2% in June. The Producer Price Index (PPI) declined by 0.8% YoY in July, at the same pace as seen in June. The figure was above the market consensus of -0.9%.
Japan’s major indices rebounds on the day, with the Nikkei 225 gained 0.52% to 35,015, while the broad-based Topix was up 0.51% to 2,475. The Japanese Yen (JPY) weakens for the fourth consecutive day against the US Dollar (USD), which provides some relief to the Japanese stocks.
On the Indian front, the Nifty 50 index jumped by 1.00% to 24,350 and the BSE Sensex 30 rose 0.92% to 79,610 on Friday. The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) decided to leave its repo rates unchanged at 6.50% for the ninth consecutive meeting and maintain its ‘Withdrawal of Accommodation" stance.
The Indian central bank also retains the real Gross Domestic Product (GDP) growth projection for FY25 at 7.2% and maintains the Consumer Price Index (CPI) inflation forecast for FY25 at 4.5%.
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.
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