Asian stock markets faced widespread declines on Friday, tracking losses on Wall Street and reacting to regional political and economic uncertainties. South Korean equities were among the hardest hit, as the country grappled with a deepening political crisis, while investors remained cautious ahead of critical U.S. labor data.
Asian Markets Under Pressure
Most Asian indices traded lower on Friday, mirroring overnight losses in U.S. markets. The three major U.S. indexes had closed in the red on Thursday after hitting record highs earlier in the week, with futures indicating a continued downward trend during Asian trading hours.
Investor focus is firmly on the upcoming U.S. nonfarm payrolls report, which is expected to provide key insights into the Federal Reserve’s stance on future interest rate decisions. While a December rate cut by the Fed seems likely, there is uncertainty about the central bank’s long-term approach to monetary easing.
South Korea’s KOSPI Declines Amid Political Crisis
South Korea’s KOSPI index tumbled 1.6% on Friday, extending its losses from the previous session when it dropped nearly 1%. The index experienced heightened volatility following President Yoon Suk-Yeol’s controversial decision to revoke martial law just days after imposing it. The sudden reversal came in the wake of widespread public backlash and political condemnation.
The ruling party leader, Han Dong-hoon, added to the turmoil by calling for President Yoon’s removal, citing concerns over national stability. This political uncertainty weighed heavily on investor sentiment, contributing to sharp declines in South Korean equities.
Broad Regional Losses in Asian Markets
Several other Asian markets also recorded losses:
- The Philippines’ PSEi Composite declined by 0.5%.
- Singapore’s FTSE Straits Times Index dropped 0.4%.
- Japan’s Nikkei 225 fell 0.9%, while the TOPIX declined 0.7%.
- Malaysia’s FTSE Malaysia KLCI and Australia’s S&P/ASX 200 were down 0.3% and 0.5%, respectively.
China and Hong Kong Buck the Trend
In contrast to the broader regional declines, Chinese and Hong Kong markets posted solid gains, driven by optimism over potential economic stimulus. Investors are looking forward to the Central Economic Work Conference (CEWC) next week, which is expected to outline China’s economic priorities and stimulus plans for the coming year.
- The Shanghai Composite Index rose 0.9%.
- The Shanghai Shenzhen CSI 300 climbed 1.1%.
- Hong Kong’s Hang Seng Index surged by 1.2%.
This rally underscores growing investor confidence in China’s ability to implement effective measures to support its slowing economy.
India’s Markets Await RBI Rate Decision
India’s markets also faced cautious trading, with Nifty 50 Futures signaling a slightly lower opening. Investors are keenly awaiting the Reserve Bank of India’s (RBI) interest rate decision, expected later in the day.
The central bank is widely anticipated to hold its repo rate steady at 6.50%, as inflation in October exceeded its upper tolerance limit of 6%. However, some market participants are betting on a 25 basis-point rate cut, citing weaker-than-expected GDP growth in the September quarter, which hit a seven-quarter low. The recent depreciation of the Indian rupee has added to the case for monetary easing.
According to ING analysts, “India is likely to remain the fastest-growing economy in the region in 2025, though growth will be somewhat slower than in 2024. Inflation should stay within the RBI’s target range, and the Indian rupee is expected to outperform.”
Upcoming Data to Shape Market Sentiment
Next week, Asian markets will shift their focus to key economic data releases from China and India, as well as central bank decisions:
- China will host its Central Economic Work Conference (CEWC), a crucial annual meeting expected to detail stimulus plans and economic reforms. The country will also release November CPI inflation data on Tuesday and trade data on Wednesday.
- India is scheduled to publish its CPI inflation report for November, providing further clarity on price trends.
- The Reserve Bank of Australia will announce its interest rate decision on Tuesday, with investors anticipating a potential policy shift.
Outlook for Investors
Global markets remain on edge as they navigate a mix of political uncertainties, economic data, and central bank actions. The political crisis in South Korea and concerns over inflation and growth in India and China add layers of complexity to an already volatile market environment.
With the Federal Reserve’s interest rate decisions and upcoming data from major Asian economies, next week promises to be pivotal for both regional and global markets. Investors should remain vigilant and closely monitor developments to identify opportunities in the midst of volatility.