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Asian stocks rebounds after AI sell-off, Taiwan’s Taiex leads gains
- Asian stock markets mostly trade positive on Monday.
- Taiwan's benchmark leads gains, rising by 5.30% on the day.
- Markets rebound after a tech rout triggered by Democrats’ sweeping victory in US midterm elections.
Asian equities mostly trade in positive territory on Monday. Nervous calm after a volatile week when tech-heavy markets in Asia suffered some of their steepest falls in years over Artificial Intelligence (AI).
Taiwan's benchmark, TAIEX, climbed around 5.30% to 41,800. The index recovers after notching up its steepest weekly drop in two decades last week, when fears about AI profitability and infrastructure demand sparked a rout following wins by Democrats at the US midterm elections.
Meanwhile, a company-led investigation by industry bellwether Nvidia into whether its CEO Jensen Huang had been the target of a foreign spying effort could also stoke volatility, analysts said.
The Nikkei 225, Japan’s benchmark, rose 2.90% to 59,090. According to the BoJ minutes of the September meeting released last week, most of the policymakers agreed that further interest rate increases would be appropriate as underlying inflation approached the central bank's 2% target.
The SHANGHAI, China’s main stock market index, gained by 0.35% to 3,660. The Hong Kong Stock Exchange increased by 0.13% to 24,520. The Shenzhen Stock Index declined by 0.14% to 11,160.
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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