Regional Markets Bounce Back After Initial Slump
Most Asian stocks experienced an upswing on Tuesday, fueled by a surge in regional technology shares driven by renewed optimism around artificial intelligence.
Investors closely monitored upcoming inflation reports to gauge potential interest rate cuts later in the year.
Regional Inflation Offers Positive Signals:
Despite a challenging start to 2024, regional markets rebounded from a five-session decline, with attention shifting to inflation reports.
Positive cues emerged from Japan’s Nikkei 225 index, which rose by 1.4%. Tokyo’s inflation data for December met expectations, bringing it close to the Bank of Japan’s 2% target.
The recent earthquake in central Japan, while affecting sentiment, sparked speculations about potential delays in ending ultra-dovish policies to support post-disaster rebuilding.
Asian Tech Stocks Soar Amid AI Enthusiasm and Bargain Hunting
The Nikkei’s gains were further propelled by a surge in heavyweight technology stocks, particularly those linked to artificial intelligence.
Advantest Corp., a chip testing equipment maker, soared nearly 7%, standing out as one of the top performers.
Hong Kong’s Hang Seng index also saw a 1% increase, driven by strength in technology stocks, including a 6.1% rally for PC maker Lenovo Group, which unveiled over 40 new AI-powered devices at the Consumer Electronics Show.
The resurgence of AI hype gained momentum following NVIDIA Corporation’s 6% surge to record highs, influenced by New Street Research naming the stock among its top picks for 2024. This enthusiasm spilled over into Asian stocks.
In South Korea, the KOSPI rose by 0.3%, with broader tech gains offsetting a 0.5% decline in Samsung Electronics Co Ltd. SK Hynix Inc, Samsung’s peer specializing in advanced memory chips linked to AI development, rose over 2%, despite Samsung’s fourth-quarter profit slump.
The tech stock gains were also attributed to substantial bargain hunting, as the sector faced challenges in the first week of 2024 amid doubts regarding early Fed interest rate cuts. The uncertainty lingered ahead of key U.S. consumer price index (CPI) data expected to show a mild increase in December inflation.
Broader Asian Stocks Show Advances
Beyond the tech sector, broader Asian stocks made positive strides. Australia’s ASX 200 rose by 1.1%, supported by data indicating a larger-than-expected increase in retail sales through November.
China’s Shanghai Shenzhen CSI 300 and the Shanghai Composite index also saw modest gains from recent lows, with Chinese inflation and trade figures slated for later in the week.
Chinese stocks, among the worst performers in Asia in 2023, struggled to recover amid uncertainties surrounding the post-COVID economic revival.
Indian markets, represented by futures for the Nifty 50 index, hinted at a mildly positive opening, aiming to recover from losses in the initial week of 2024. The focus this week includes quarterly earnings from index heavyweights Infosys Ltd and Wipro Ltd, along with Indian CPI data for December.