Japan, South Korea Equities Poised for Strong November Gains, China Trails Behind

In November, Japan’s Nikkei 225 and South Korea’s KOSPI outperformed other Asian markets, buoyed by the expectation of a more dovish Federal Reserve, which enhanced the appeal of riskier assets. The Nikkei approached 33-year highs, increasing by 7.9% for the month, as foreign investment surged following the Bank of Japan’s (BOJ) reaffirmation of its dovish stance. Despite economic headwinds indicated by a contraction in GDP, the BOJ’s commitment to maintaining loose monetary policy and stimulus efforts underpinned Japanese equities, with sectors like automotive and banking contributing to robust earnings.

The KOSPI also saw significant gains, poised to rise by 10.3% in the same period. A key driver was the strong performance of chipmaker stocks, which benefited from the anticipation of a surge in demand driven by advances in artificial intelligence. Additionally, a government-imposed ban on short-selling earlier in the month resulted in a considerable intraday leap for the index.

Conversely, Chinese markets struggled, with the Shanghai Shenzhen CSI 300 index set to dip by approximately 2%. Economic concerns persisted as data continued to signal a slowdown, and the government’s response with stimulus measures was perceived as insufficient. The persistent weakness in the property market and a drop in overseas demand also weighed on sentiment. As a result, investors called for more robust fiscal interventions to support economic growth, but Chinese stocks remained subdued, hovering near their lowest levels since March 2019.

In contrast, other Asian markets experienced notable improvements, with Australia’s ASX 200 climbing 3.9% and India’s NSEI expecting to add 5.3% for the month. These gains were spurred by softer signals from the U.S. Federal Reserve regarding interest rates, alongside more tempered U.S. inflation and labor market figures, which reduced the likelihood of further rate hikes.

This divergence in market performances across the region reflects varying responses to global monetary policy shifts, local economic developments, and government regulatory actions. The contrasting fortunes of these markets highlight the interplay between investor sentiment, economic policies, and the broader global economic landscape.