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Asian stocks rise as tech surges on AI hype; Inflation remains in focus

Published 01/08/2024, 10:14 PM
Updated 01/08/2024, 10:14 PM
© Reuters. Most Asian stocks rose on Tuesday as regional technology shares surged amid renewed optimism over artificial intelligence, while focus remained on a slew of upcoming inflation reports for more cues on interest rate cuts this year.

Regional markets recovered from a rough start to 2024, having mostly fallen for the past five sessions as markets second-guessed expectations for early interest rate cuts by the Federal Reserve.

U.S. inflation data due later this week is expected to provide more cues on the matter.

Regional inflation readings offered some positive cues. Japan’s Nikkei 225 index surged 1.4% after a long weekend, as data showed inflation in Tokyo- which acts as a bellwether for the country- fell as expected in December, and was now within spitting distance of the Bank of Japan’s annual 2% target.

While a devastating earthquake in central Japan somewhat dented sentiment towards the country, it also sparked some bets that the BOJ will have to delay plans to end its ultra-dovish policies in the face of rebuilding efforts after the disaster.

Asian tech stocks surge amid resurgent AI hype, bargain buying

Gains in heavyweight technology stocks also boosted the Nikkei, particularly those with exposure to artificial intelligence. Chip testing equipment maker Advantest Corp. (TYO:6857) surged nearly 7% and was among the top performers on the Nikkei.

Hong Kong’s Hang Seng index shot up 1% on strength in technology stocks, with PC maker Lenovo Group (HK:0992) rallying 6.1% after it unveiled over 40 new devices and products powered by AI at the Consumer Electronics Show.

Hype over AI came back into play after chipmaker NVIDIA Corporation (NASDAQ:NVDA)- which is at the heart of an AI-fuelled rally in 2023- surged over 6% to record highs on Monday, as New Street Research named the stock among its top picks for 2024. These gains spilled over into Asian stocks.

South Korea’s KOSPI rose 0.3%, with gains in broader tech helping offset a 0.5% decline in Samsung Electronics Co Ltd (KS:005930), after the conglomerate clocked a 35% slump in its fourth-quarter profit.

Samsung’s peer SK Hynix Inc (KS:000660), which develops advanced memory chips linked to AI development, rose over 2% even as Samsung’s earnings pointed to more near-term pain for chip demand.

Gains in tech stocks were also driven by a heavy dose of bargain hunting, as the sector was battered in the first week of 2024 amid growing doubts that the Fed will cut interest rates early in 2024. These doubts still remained in play ahead of key U.S. consumer price index (CPI) data due this Thursday, which is expected to show a mild increase in inflation in December.

Broader Asian stocks also advanced. Australia’s ASX 200 rose 1.1% after data showed a bigger-than-expected jump in retail sales through November. A reading on Australian CPI inflation is due on Wednesday.

China’s Shanghai Shenzhen CSI 300 rose 0.1% from a five-year low, while the Shanghai Composite index rose 0.2% from an over 13-month low. Chinese inflation and trade figures are also on tap later this week.

Chinese stocks were among the worst performers in Asia in 2023, as a post-COVID economic recovery in the country largely failed to materialize.

Futures for India’s Nifty 50 index pointed to a mildly positive open, with the index set to recover from steep losses in the first week of 2024. Focus this week is also on quarterly earnings from index heavyweights Infosys Ltd (NS:INFY) and Wipro Ltd (NS:WIPR), as well as Indian CPI data for December.

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