A powerful wave of optimism swept across Asia-Pacific markets on Wednesday, as investors cheered US inflation data that solidified expectations for a Federal Reserve interest rate cut next month.
Japan’s Nikkei 225 continued its stunning ascent, shattering records for a second consecutive day, while strong corporate earnings in China added another layer of fuel to the fire.
The buying was widespread. In Tokyo, the Nikkei benchmark climbed another 1% after Tuesday’s record-setting session, while the broader Topix index added 0.72%.
The rally extended across the region, with South Korea’s Kospi advancing 1.07% and Australia’s S&P/ASX 200 rising 0.29%, as markets tracked strong gains from Wall Street.
A vote of confidence in Japan Inc
The Nikkei’s record run is being driven by more than just Fed speculation. A deeper confidence in Japan’s own economic trajectory is taking hold. Among the index’s top movers were Yokohama Rubber, which gained a staggering 10%, and chip-maker Renesas Electronics, which rose over 7%.
This asset appreciation reflects a fundamental shift, according to analysts. “Recent Japanese asset appreciation reflects positive steps the government is taking to improve capital markets and corporate governance, especially corporate sensitivity to equity values,” analysts at Fitch Solutions told CNBC.
The research firm added that if the ruling Liberal Democratic Party stays on its positive policy path of opening markets to more foreign investment and workers, “the effort to escape deflation” will continue to gain ground.
The dragon roars, Tencent soars
The positive sentiment was just as potent in China, where Hong Kong’s Hang Seng Index rose 1% and the mainland’s CSI 300 added 0.33%.
The Shanghai Composite Index surged to its highest intraday level since December 2021, according to LSEG data, signaling a major breakout.
A standout star was Tencent Music Entertainment Group, which saw its shares rocket up 16%. The surge came a day after the company smashed estimates for its second-quarter revenue and profit, driven by robust subscriber growth.
It reported revenue of 8.44 billion Chinese yuan ($1.18 billion) against estimates of 7.98 billion yuan, a performance its chairman credited to broad-based strength.
“While our music subscription business remained a core growth driver, our expanding suite of music-related services—including advertising, concerts, and artist merchandise—showed impressive momentum,” said Cussion Pang, executive chairman at the company.
Mumbai poised for a rebound
This wave of global optimism is expected to lift the Indian bourses, setting the stage for a sharp reversal from the previous session.
Both the Sensex and Nifty 50 are likely to open higher on Wednesday, with trends on the Gift Nifty pointing to a strong start. Early indications showed the Gift Nifty trading around the 24,619 level, a healthy premium of nearly 64 points over the Nifty futures’ last close.
The expected gains come after the equity market took a breather on Tuesday, snapping its winning streak.
The Sensex declined 368.49 points to close at 80,235.59, while the Nifty 50 settled 97.65 points lower at 24,487.40, making Wednesday’s anticipated rally a welcome return to form.
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