Asian stock markets closed mixed today, affected by low trading volumes and limited liquidity, a common feature of the final sessions of the year. This volatility comes as investors await the outlines of the new economic year, amid ongoing assessments of global central bank policies.
Key indicators performance
The session saw mixed movements in the region's major indices:
- Japan: The Nikkei 225 index fell 0.1%, while the broader Topix index declined 0.4%, affected by the rise in the value of the local currency.
- China and Hong Kong: Chinese stocks posted a slight gain, with the Shanghai Composite Index rising 0.3%, while the CSI 300 remained virtually unchanged. In Hong Kong, the Hang Seng Index increased by 0.2%.
- Other markets: South Korea's Kospi index fell 0.2%, Singapore's Straits Times index was flat, India's Nifty 50 index rose 0.2%, and Australia's S&P/ASX 200 index fell 0.4%.
Trading context and year-end
Trading in the final days of December is typically relatively quiet and liquid, as many portfolio managers and financial institutions close their annual books, and many investors prefer to remain neutral before the New Year holidays. Despite this lull, stocks had benefited in previous sessions from positive momentum emanating from Wall Street, bolstering hopes for a year-end rally. However, the absence of new catalysts today led to this divergence.
The Japanese yen steals the spotlight
In the currency markets, the most notable event was the strong performance of the Japanese yen, which became the focus of global traders. The Japanese currency rose for the second consecutive day, surpassing the 157 yen mark against the US dollar.
This remarkable rise is attributed to statements by Japanese Finance Minister Satsuki Katayama, who asserted in a press interview that her country "has complete freedom to take bold measures regarding currency movements." These statements serve as a stark warning to speculators betting on a weaker yen.
Background and impact of monetary policy
The yen's movements are particularly significant given the Bank of Japan's historic shift in monetary policy, which saw it raise interest rates last Friday, ending a long era of excessive monetary easing. This policy change, coupled with a recent 0.4% decline in the dollar index, is putting additional pressure on the US currency and supporting the yen's recovery. This, in turn, sometimes negatively impacts the shares of Japanese exporting companies, partially explaining the Nikkei index's decline.
