Asia markets diverge as Nikkei tops 71,000 while HSI slumps

Asia-Pacific markets split sharply on Thursday as Japan, Taiwan and South Korea hit records while Hong Kong plunged to a near one-year low.

The Nikkei 225 surged 1.65% to 71,052, while Hong Kong's Hang Seng Index tumbled 1.7% to 23,894 after the Federal Reserve held rates steady with a hawkish tilt that triggered a capital rotation across the region.

"The Fed's hawkish hold is driving a divergence within Asia — markets with strong tech exposure and export competitiveness are benefiting from dollar strength, while rate-sensitive sectors like Chinese property are bearing the brunt," said Sarah Lin, equity strategist at Edgen.

Japan's benchmark hit an intraday record of 71,398 before closing at 71,052, rising 1,150 points. Taiwan's stock market reached an all-time intraday high of 46,565, gaining 1.2%, while South Korea's Kospi touched a record 8,976 and last traded at 8,925, up 0.7%. In contrast, Hong Kong's Hang Seng Index plunged as much as 445 points to 23,866 — its lowest in nearly a year — before settling at 23,894, with turnover of HKD 120.48 billion. The divergence came after the Fed held its federal funds rate at 3.5% to 3.7%, with the dot plot signaling the possibility of a rate hike later this year.

The selloff in Hong Kong was concentrated in Chinese property developers, the most rate-sensitive segment of the market. China Resources Land dropped 3.1%, Longfor Group slid 4.5%, and China Overseas Land & Investment fell 4.1%, while Agile Group Holdings tumbled 6.1%. The sector's weakness reflects concern that higher-for-longer US rates will keep pressure on China's already-strained property market and limit the People's Bank of China's room to ease monetary policy.

The yen weakened past the 160 mark against the dollar, touching 160.79 — its weakest level since July 2024 — as the greenback strengthened after the Fed's hawkish signal. Chief Cabinet Secretary Minoru Kihara said authorities would "take appropriate action as needed at any time," keeping intervention risks elevated. The weaker yen boosted export-oriented Japanese stocks, particularly semiconductor-related shares, which tracked overnight gains in the Philadelphia Semiconductor Index.

Brent crude fell 1.48% to $78.37 a barrel after the US and Iran signed a memorandum of understanding to end the war, reopening the Strait of Hormuz and waiving sanctions on Iranian oil. The agreement weighed on energy stocks across the region.

US equities declined overnight, with the Dow Jones Industrial Average falling 0.98%, the S&P 500 losing 1.21%, and the Nasdaq Composite dropping 1.34%, as traders repriced rate expectations following the Fed decision.

This article is for informational purposes only and does not constitute investment advice.