Asia report: Markets join global rally as BoK holds rates

Asia-Pacific markets experienced a strong rally on Thursday, driven by optimism over potential Federal Reserve rate cuts and the positive performance of US big tech stocks overnight.

The Bank of Korea was also in focus, as it left its base rate on hold at 3.5%, as widely expected.

“Ahead of the expected US consumer pricing data on Thursday, Asian stocks saw an increase, driven by a surge in the world's largest tech companies, leading to record highs in global shares,” said TickMill market analyst Patrick Munnelly.

“China, Australia, and Japan all experienced stock market gains on Wednesday following a positive session on Wall Street.

“The decline of the collar against most major currencies prior to significant US inflation data suggests a potential reduction in price pressure and an increased likelihood of interest rate cuts by the Fed.”

Munnelly said anticipation for the US consumer price data contributed to the rise in Asian stocks, fuelled by the strong performance of big tech overnight, propelling global shares to all-time highs.

“Taiwan Semiconductor Manufacturing, the exclusive supplier of Nvidia and Apple's most advanced chips, reached record highs after reporting its second-quarter revenue growth at the highest rate since 2022.

“Sony Group, Tencent Holdings, and Korean chipmaker SK Hynix were also key contributors to the regional stock index increase, with SK Hynix trading at its highest levels since 2000.”

Markets surge across the Asia-Pacific region

In Japan, the Nikkei 225 soared past the 42,000 mark for the first time, closing at 42,224.02 with a gain of 0.94%.

Technology stocks powered the surge, with SUMCO rising by 5.89%, Sumitomo Osaka Cement increasing by 5.43%, and Eisai advancing by 4.4%.

The broader Topix index also set a new high, rising 0.69% to close at 2,929.17.

China's markets followed suit with significant gains - the Shanghai Composite rose by 1.06% to 2,970.39, and the Shenzhen Component climbed 1.99% to 8,870.36.

Leading the charge in Shanghai were Ningbo Ronbay New Energy Tech, which skyrocketed by 11.7%, followed by China Grand Automotive Services, up by 10.13%, and Lifan Industry Group, which increased by 10.08%.

Hong Kong's Hang Seng Index saw a robust increase of 2.06%, ending at 17,832.33.

Prominent performers in the special administrative region included Li Auto, which rose by 7.07%, Zhongsheng Group, up by 6.26%, and New World Development, which advanced by 5.51%.

South Korea's Kospi gained 0.81%, closing at 2,891.35.

Notable stocks included Hanon Systems, which rose by 9.57%, EcoPro Materials, up by 7.33%, and Kumho PetroChemical, which increased by 6.82%.

In Australia, the S&P/ASX 200 advanced by 0.93% to 7,889.60, with the top gainers including Telix Pharmaceuticals, which surged by 10.48%, Clarity Pharmaceuticals, up by 9.43%, and Paladin Energy, which rose by 6.15%.

New Zealand's S&P/NZX 50 increased by 0.96%, closing at 12,058.29.

Synlait Milk led the way with a remarkable rise of 23.08%, followed by Ryman Healthcare, up by 5.77%, and Summerset Group, which increased by 3.65%.

Currency markets showed minor fluctuations, with the dollar last down 0.12% on the yen to trade at JPY 161.50, while it slipped 0.15% against the Aussie to AUD 1.4799, and retreated 0.13% on the Kiwi, changing hands at NZD 1.6421.

In the commodities market, oil prices saw slight upticks, as Brent crude futures inched up 0.19% on ICE to $85.24 per barrel, while the NYMEX quote for West Texas Intermediate rose 0.11% to $82.19.

Bank of Korea stands pat on rates, Japan core machinery orders fall on the month

In economic news, the Bank of Korea (BoK) maintained its core interest rate at 3.5%, aligning with market expectations.

The decision, devoid of any dissent, highlighted a cautious approach to monetary policy from the central bank.

In its decision, the BoK emphasised its commitment to financial market stability and indicated a dovish shift in its policy stance.

The bank's statement suggested that the timing of any future rate cuts would depend on supportive economic and financial conditions.

“In our view, the issues of household debt and the property market need to be addressed jointly with government measures, not just monetary policy,” said Min Joo Kang, senior South Korea and Japan economist at ING.

“However, this could still be a factor that delays the BoK's decision to cut rates.

“Inflation has been on a downward trend in recent months, but the price of city gas and some public services prices are set to rise in the third quarter.”

Min also noted that inflation expectations remained at 3.0%.

“Despite the scheduled price hikes, inflation is expected to ease to a sub-2% level from August, mostly due to base effects.

“The market is split on the timing of the first cut between August and October - we are leaning towards an October cut rather than an August cut.”

Elsewhere, core machinery orders in Japan increased by 10.8% year-on-year, surpassing the 7.2% rise forecasted by Reuters.

Despite that annual growth, machinery orders declined for the second consecutive month on a month-on-month basis, falling 3.2% against an expected 0.8% increase.

That decline in orders, a key indicator of capital spending, signalled potential economic fragility.

The drop could complicate the Bank of Japan's efforts to normalise monetary policy.

Reporting by Josh White for Sharecast.com.