Asia stocks rise on China hopes; Japan trims gains after BOJ rate hike

Investing.com– Most Asian stocks rose on Friday tracking record highs on Wall Street and optimism over more policy relief for China, while Japanese markets trimmed some gains after the Bank of Japan hiked rates and struck a hawkish chord.

Regional markets took a positive lead-in from Wall Street, where the S&P 500 hit a record high as President Donald Trump said he will call for lower interest rates from the Federal Reserve. Trump 

U.S. stock index futures steadied in Asian trade, with focus turning to a Fed meeting next week, where the central bank is widely expected to keep rates unchanged. 

Sentiment towards Asian markets was also supported this week by China outlining more support for local equities, as they grappled with concerns over increased trade tariffs under Trump.

Japanese stocks trim gains as BOJ raises interest rates, warns on economy

Japan’s Nikkei 225 and TOPIX indexes rose 0.4% and 0.6%, respectively, trimming some gains after the BOJ’s move.

Both indexes were trading up between 3% and 5% this week, as analysts bet that a BOJ rate hike was largely priced in.

The central bank raised interest rates by 25 basis points as widely expected, but forecast higher inflation and slower growth in the coming years.

The BOJ also warned that it will raise interest rates further if its economic forecasts were met, offering up one of the clearest signals on more rate hikes.

Strong consumer price index inflation data, released earlier in the day, furthered bets on a rate hike. 

But while higher rates bode poorly for Japanese markets, they also reflect increasing confidence in the local economy, which stands to benefit domestically exposed sectors. 

Purchasing managers index released on Friday showed Japan’s manufacturing sector shrank for a seventh consecutive month in January. But growth in services picked up sharply.

Chinese stocks rise on policy cheer; Hong Kong rallies 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose 0.7% and 0.4%, respectively, extending gains from earlier in the week.

Hong Kong’s Hang Seng index was a standout performer in Asia, rallying 1.7% on gains in major chipmaking stocks, as investors bet that recent U.S. export controls would boost local demand for the sector.

Sentiment towards China was buoyed by Trump floating the idea of a Sino-U.S. trade deal, just days after he threatened to impose 10% tariffs on Beijing by February 1. Chinese markets had initially fallen this week after Trump’s threat.

But local markets rebounded on more policy support from Beijing. The government asked state-run insurers and financial institutions to deploy more capital into local equities. 

Chinese markets will be closed next week for the Lunar New Year holiday. But before that, key PMI data for January is due on Monday. 

Broader Asian markets were mostly upbeat. Australia’s ASX 200 added 0.5%, even as PMI data showed business activity remained weak in January. 

Gains in chipmaking stocks- on optimism over a $500 billion artificial intelligence project in the U.S.- drove South Korea’s KOSPI up 0.8%. 

Singapore’s Straits Times index fell slightly as the Monetary Authority of Singapore loosened monetary policy for the first time since 2020, warning that it expects growth to be slower than initially forecast this year. But inflation is also expected to decline.

Futures for India’s Nifty 50 index pointed to a flat open, as the index wallowed near seven-month lows.