Summary:
Asian stocks surge as the Nikkei 225 hits records, Japan's GDP surprises, and stimulus hopes lift China's CSI300. Can the rebound hold amid mixed data?
Asian equities rebounded strongly this week, with the Nikkei 225 posting a fresh record high after surging 1.7% to close at 43,378 on Friday, fuelled by Japan's Q2 2025 GDP beating expectations at +1.0% annualised.
China's benchmark CSI300 index gained 2.4% in Q2 and logged its biggest weekly rise in seven months, even as retail sales and factory output showed signs of weakness, sparking new stimulus hopes. So yes, Asian stocks are mounting a notable rebound, but mixed signals from China and global inflation suggest caution is warranted.
Japanese shares started August with a bang, breaking the 43,000 mark for the first time ever. The Nikkei 225 ended Friday at 43,378, up 1.7% from the previous session and marking a six-session winning streak.
Over the past month, the index climbed 9.4% and is up 14% year-on-year. The broader Topix Index also scaled an all-time peak, buoyed by bumper earnings and renewed investor confidence in tech and automotive stocks.
Key drivers behind the Nikkei's surge:
Q2 GDP Surprise: Japan's economy grew 0.3% quarter-on-quarter and 1.0% annualised in Q2 2025, topping forecasts of 0.4%. Net exports and capital spending, especially in tech and digitalisation, provided upside.
Earnings Momentum: Standouts included Renesas (+7%), Advantest (+5.4%), Sony Group (+3.5%), Yokohama Rubber (+8.3%), and Asics (+18% after results).
Global Tailwinds: Wall Street's record highs, benign US inflation (+2.7% headline for June), and strong risk appetite have lifted Asian sentiment.
China's CSI300 Index rose 2.4% in Q2, outperforming broader emerging markets, and posted its strongest week since January. However, July figures show challenges:
Retail Sales rose just 3.7% year-on-year, versus forecasts above 4%.
Factory Output gained 5.7%, an eight-month low.
Housing Prices fell again, albeit at a slower pace, in major cities.
Despite the downbeat data, Chinese equities have been bolstered by renewed stimulus hopes from Beijing. Policymakers are expected to roll out fresh support, particularly in the property and consumer sectors, aiming to hit the government's 5% GDP growth target for 2025.
Reports say major state-owned companies may begin buying unsold homes from struggling developers, and margin financing balance for stocks now exceeds 2 trillion yuan (US$278.5 billion)—the highest since 2015.
Asian stock gains were not uniform. Hong Kong's Hang Seng slid 1.2% and tech majors like JD.com dropped 4% on weaker profits. South Korea, Australia, and India had markets closed for holidays.
Nonetheless, broader regional optimism remains, with trade-sensitive sectors leading while investors look for signs of US-China trade progress, further rate cuts, and new policy actions.
Other notable moves:
SoftBank Group (Japan): +1.3% for the week as AI and tech bets pay off.
Mitsubishi UFJ Financial: +5.8%, driven by strong earnings and capital flows.
Japan's Toyota: +1.7% as export demand remains resilient to tariffs.
Positive catalysts:
US inflation coming in softer at 2.7% (June), keeps Fed rate cut bets alive, and boosts risk appetite globally.
Better Japanese output and exports, in part from pre-emptive moves ahead of US 15% blanket tariffs, support the Nikkei.
Optimism in China, especially around housing/property and green tech.
Risks to watch:
China's economic fragility: If July/August data remains weak, stimulus may disappoint and pressure equities.
US inflation or rate surprises: Any hawkish turn could unsettle Asian assets.
Sector concentration: Tech and property drive much of the current rally—any reversal here could weaken the recovery.
The base case is cautiously optimistic: as long as Japanese GDP, US policy, and Chinese stimulus provide tailwinds, Asian equities could extend gains. Analysts see the Nikkei holding above 43,000 for now and China's CSI300 staying firm if new support arrives and consumer/property sentiment stabilises.
But with uneven sector performance and persistent macro risks, from US inflation surprises to property market stress in China, the rebound remains somewhat fragile. Traders should watch for fresh stimulus details from Beijing, Japan's upcoming export data, and the next US CPI/PPI prints.
Momentum is real: Asian stocks are rebounding, led by Japan and China.
Data is mixed, with Chinese growth still a worry.
Central banks and policymakers will be pivotal for sustaining strength.
Stocks at record highs often face profit-taking and volatility, so risk management is critical.
Trade-sensitive sectors and policy-driven plays (AI, EVs, green energy in Asia) remain in focus.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment, or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person.
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