Asian equities opened higher on Tuesday, buoyed by a rebound in technology shares following gains on Wall Street and renewed investor optimism over a potential Federal Reserve rate cut in December.
However, the recovery was tempered by concerns over escalating diplomatic tensions between China and Japan, as well as financial risks in certain developed economies. Technology stocks, while recovering, still faced pressure from previous declines, though strong bargain-buying emerged during the session.
Tech Stocks Drive Market Momentum
Markets with heavy tech exposure led the gains. Hong Kong’s Hang Seng Index climbed 1.2%, while South Korea’s KOSPI advanced 0.9%. Investor sentiment was boosted by news of Google’s new AI model and plans for developing proprietary AI chips, reinforcing confidence in long-term growth prospects for the sector.
Asian tech shares saw significant buying after earlier steep declines, primarily driven by concerns over valuations and AI prospects. South Korea, where the KOSPI is dominated by tech companies, was among the biggest beneficiaries.
In Hong Kong, major internet firms such as Alibaba rose nearly 3% ahead of quarterly earnings announcements. Alibaba’s AI application Qwen surpassed 10 million downloads in its first week, supporting the stock’s upward momentum. Upcoming financial reports are expected to provide clearer insights into retail spending and AI development initiatives, highlighting the company’s leadership in China’s tech landscape.
Mainland Chinese indices also posted gains, led by local tech and semiconductor companies. The CSI 300 rose 1.4% and the Shanghai Composite gained 1.2%.
Japan Lags Amid Financial and Diplomatic Concerns
While Japanese tech stocks inched higher, broad indices such as the Nikkei 225 rose just 0.6%, and TOPIX remained largely flat. Gains were constrained by concerns over Japan’s fiscal health, particularly as the government plans increased public spending. Long-term government bond yields, though slightly lower, remain near multi-decade highs.
Ongoing diplomatic tensions with China continued to weigh on certain sectors, particularly travel and entertainment. ANA Holdings and Japan Airlines fell 0.6% and 1.8% respectively, following reports of thousands of Chinese tourists canceling trips to Japan. Chinese carriers were also affected, extending losses from previous sessions.
Other Markets Show Limited Movement
Elsewhere in the region, markets such as Australia’s ASX 200 and Singapore’s Straits Times Index traded nearly flat, reflecting cautious sentiment as investors balanced expectations for a U.S. rate cut against regional geopolitical risks.
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