Asia-Pacific markets opened higher Monday, recovering from last week’s sharp declines prompted by artificial intelligence valuation concerns.
Investors across the region focused on fresh inflation data from China and policy signals from Japan as they sought stability amid global market jitters.
South Korea’s Kospi index surged 2.76 percent, led by gains in banks and insurance stocks. The smaller Kosdaq index, which tracks technology and smallbcap companies, rose 0.62 percent.
Japan’s Nikkei 225 advanced 0.94 percent, while the broader Topix climbed 0.24 percent. In Hong Kong, the Hang Seng index gained 0.71 percent, and China’s CSI 300 edged up 0.22 percent.
Markets across Asia-Pacific had experienced notable losses last week, driven primarily by concerns over inflated valuations in artificial intelligence linked stocks.
Analysts said investors reacted to a mix of overenthusiastic optimism about AI’s commercial prospects and broader uncertainty in global markets.
“Last week’s AI sell off was a correction many had anticipated given the rapid price appreciation earlier this quarter,” said Min Jae Kim, senior market strategist at Seoul based Mirae Asset Securities.
“Monday’s rally reflects a return to fundamentals rather than speculative trading.” Over the weekend, China released October inflation data, which showed headline consumer prices rising 0.2 percent year on year, slightly above economists’ expectations of no growth, according to a Reuters poll.
Wholesale inflation fell 2.1 percent, a marginal improvement over the anticipated 2.2 percent decline. Economists noted that the modest increase in consumer prices suggests persistent inflationary pressures in the Chinese economy, which could influence corporate margins and supply chain costs across Asia.
“While headline inflation remains contained, the wholesale numbers indicate upstream price pressures are easing more slowly than expected,” said Li Wei, an economist at Shanghai based East Asia Research Institute. “Markets are now pricing in cautious optimism, balancing growth prospects against potential monetary tightening.”
In Japan, minutes from the Bank of Japan’s October policy meeting suggested the central bank is increasingly open to a near term interest rate hike.
The minutes stated that “conditions for taking a further step toward the normalization of the policy interest rate have almost been met,” while also noting that officials will continue to monitor the underlying inflation trend.
“Investors reacted positively to the possibility of policy normalization,” said Takumi Sato, chief economist at Tokyo based Nomura Securities. “It signals confidence in Japan’s recovery, even as the BOJ remains vigilant on inflation risks.”
Regional data highlights the varied market response to macroeconomic signals!
- South Korea: Kospi +2.76 percent, Kosdaq +0.62 percent
- Japan: Nikkei 225 +0.94 percent, Topix +0.24 percent
- Hong Kong: Hang Seng +0.71 percent
- China: CSI 300 +0.22 percent
- Japan 10 year government bonds: Yield at 1.69 percent, highest since October
Meanwhile, US markets showed mixed signals on Friday. The Nasdaq Composite fell further after last week’s losses in tech stocks, while the Dow Jones Industrial Average and S&P 500 eked into positive territory following proposals by Senate Minority Leader Chuck Schumer aimed at resolving the ongoing US government shutdown.
A University of Michigan survey also highlighted subdued consumer confidence in the United States, showing sentiment near historical lows.
October layoff announcements were reported at the highest level for the month in 22 years by Challenger, Gray & Christmas. Analysts said such data could weigh on U.S. market stability and investor sentiment globally.
Market participants in Seoul and Tokyo described cautious optimism among investors. “Trading today feels measured,” said Ji-Hoon Park, portfolio manager at KB Asset Management.
“Investors are slowly returning to beaten down sectors such as banking, but tech remains volatile after the AI driven sell off.” In Hong Kong, retail investors expressed relief at modest gains.
“It’s good to see some stability,” said Mei Ling, a private investor. “Last week’s losses were worrying, and now there’s a sense that markets are leveling off.”
Analysts caution that volatility could persist as markets digest a combination of AI related speculation, inflation trends, and central bank signals.
“Investors should expect swings as they reassess growth prospects versus potential tightening in monetary policy,” said Li Wei. “Asia’s markets are sensitive to both domestic data and US macroeconomic developments, including the government shutdown situation.”
South Korea’s market may continue to see momentum if banks and financials sustain gains, while Japan’s bond yields and potential rate hikes could influence broader equity and currency flows. In China, inflation trends will remain a key focal point for both policymakers and investors monitoring the recovery trajectory.
Asia-Pacific markets began the week with a recovery rally led by South Korea’s Kospi, reflecting investor response to last week’s AI driven declines.
The interplay of inflation data from China, policy signals from Japan, and ongoing uncertainty in US markets is shaping cautious optimism across the region.
Analysts emphasized that while immediate volatility may ease, broader economic and geopolitical factors will continue to influence market performance in the coming weeks.