Asian Stocks Edge Higher on Strong Chinese Data; Japan Slips on Rate-Hike Concerns

Asian stock markets mostly saw gains on Friday, bolstered by positive economic data from China, while Japanese equities faced sharp declines amid growing speculation about an interest rate hike next week.

Chinese Stocks Lead Gains on Robust Economic Data
Chinese stocks surged after data revealed stronger-than-expected economic growth. The Chinese economy expanded by 5% in 2024, meeting Beijing’s growth target. Fourth-quarter growth outpaced forecasts, and additional data showed that December’s industrial production and retail sales both exceeded expectations, driven by recent government stimulus measures. This positive momentum extended to other regional markets, which tracked gains in the world’s second-largest economy.

Caution Ahead of Trump’s Return and Trade Concerns
However, gains were tempered across the region as investors remained cautious ahead of the inauguration of U.S. President-elect Donald Trump next week. Trump’s campaign promises to reintroduce trade tariffs on Chinese exports have reignited fears of a trade war, reminiscent of tensions seen during his previous term.

Japanese Markets Decline Amid Rate-Hike Expectations
In Japan, the Nikkei 225 dropped over 1%, while the TOPIX index declined by 0.7%. Investors are focused on the Bank of Japan’s upcoming interest rate decision, scheduled for January 23-24. BOJ Governor Kazuo Ueda indicated earlier this week that a rate hike could be on the table if economic conditions continue to improve. The possibility of tighter monetary policy weighed heavily on Japanese equities.

Mixed Sentiment in Other Asian Markets
South Korea’s KOSPI index edged down by 0.2%, following the Bank of Korea’s decision to maintain its policy rate at 3.00%. This move defied expectations of a 25-basis-point cut, adding to the subdued sentiment in the market. Meanwhile, U.S. stock futures dipped slightly during Asian trading hours, influenced by an overnight slide on Wall Street, further limiting gains in the region.

Looking Ahead
The spotlight now shifts to next week’s major central bank decisions and their potential impact on global markets. The Bank of Japan’s policy update, in particular, is expected to drive significant market movements, while the continued performance of China’s economy will likely influence broader sentiment in the region.

(Sources: reuters.com, investing.com, ChatGPT)