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Asian stocks soar as Nikkei 225 hits new record high

Asian equities trade high on Monday, while the Nikkei 225, Japan’s benchmark, soars to a fresh record high following a historic election victory by Japan’s Prime Minister Sanae Takaichi.

The Nikkei 225 climbed 4.45% to 56,660. The coalition led by Takaichi’s Liberal Democratic Party (LDP) has won 352 of 465 seats in Japan's House of Representatives, figures collated by public broadcaster NHK suggest, with the LDP alone securing a majority of 316.

"The coalition's win will give Takaichi more freedom in policy decisions and strengthen her ability to pursue economic and foreign policy goals," said ING analysts.

Meanwhile, the Kospi Index jumped 4.2% to 5,305 as risk appetite improved across financial markets after US stock indexes rebounded strongly on Friday. 

China and Hong Kong stock markets gained momentum on Monday, with the SHANGHAI, China’s main stock market index, rose by 1.25% to 4,115. Hong Kong Stock Exchange jumped by 1.57% to 26,975. 

India’s Nifty50 was up 0.66% to trade at 25,869 on Monday. In Taiwan, the Taiex surged 1.96% to 32,405. Other markets in Southeast Asia were higher. Australia's S&P/ASX 200 gained 1.85% to 8,870. 

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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Lallalit Srijandorn

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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