Asia stocks: Nikkei, KOSPI up on tech rebound, China lags despite inflation bump

Asian stock markets exhibited a mixed performance on Monday, with Japan's Nikkei 225 and South Korea's KOSPI leading gains, primarily driven by a rebound in technology shares following last week's rout, further supported by NVIDIA CEO's positive comments on AI chip demand. In contrast, Chinese markets, including the Shanghai Shenzhen CSI 300, lagged despite October's inflation data showing a mild improvement in CPI and a smaller-than-expected PPI contraction, as persistent deflationary pressures and weak consumer spending remain a concern.

Analysis

Asian equity markets presented a mixed performance on Monday, with Japanese and South Korean indices leading gains driven by a rebound in technology shares. The Nikkei 225 rose 1.2% and the KOSPI surged 2.8%, primarily due to investors buying the dip in chipmakers like SK Hynix (+5%) and Samsung Electronics (+2.3%) following last week's rout. This tech sector recovery was further bolstered by NVIDIA CEO Jensen Huang's comments on strong demand for advanced Blackwell AI chips, offsetting prior concerns regarding AI-driven valuations. Japanese e-commerce firm Mercari Inc. also outperformed, soaring over 10% after reporting strong quarterly earnings, highlighting company-specific catalysts.

Conversely, Chinese markets, including the Shanghai Shenzhen CSI 300, lagged despite mildly positive inflation data. While October's CPI rose for the first time since June and PPI shrank less than expected, the latter marked its 37th consecutive month in contraction, indicating persistent deflationary pressures and weak post-holiday consumer spending.

Other regional markets showed divergence, with Singapore's Straits Times index sliding 0.8% and Australia's ASX 200 rising 0.7%, supported by ANZ Group's 1.8% gain on cost-cut pledges. This underscores a fragmented regional outlook influenced by sector-specific dynamics and idiosyncratic company news.

Key Decisions for Investors

• Investors should consider tactical long positions in Asian technology, particularly semiconductor firms, given the strong demand signals for AI chips and the sector's rebound, while closely monitoring AI valuation sustainability.
• Maintain a cautious allocation to Chinese equities, as persistent deflationary trends and weak consumer spending continue to overshadow minor improvements in inflation data.
• Focus on company-specific fundamentals and earnings reports, as demonstrated by Mercari and ANZ Group, to identify alpha opportunities amidst a mixed broader market environment.