Asia report: Markets rise as region braces for Trump trade policies

(Sharecast News) - Asian markets closed mostly higher on Monday, with Hong Kong stocks leading gains ahead of Donald Trump's presidential inauguration. Investors were cautious but optimistic as they awaited further clarity on the policy direction of the incoming US administration.

Meanwhile, China's central bank maintained both its one- and five-year loan prime rates.

"Asian markets rallied after a conversation between Donald Trump and Xi Jinping sparked optimism for easing US-China tensions," said TickMill market strategy partner Patrick Munnelly.

"Stock markets in Australia, Japan, and China saw gains, with a key index of major Chinese companies listed in Hong Kong climbing as much as 2.5%.

"The rally followed Trump's description of the discussions with Xi as 'very good'."

Munnelly noted that US stock futures meanwhile dipped slightly during Asia trading hours, with Wall Street set to remain closed on Monday for a holiday.

"The dollar index extended last week's decline, ending a six-week streak of gains.

"Investor appetite for risk assets was boosted by Trump and Xi's talks, which touched on trade, TikTok, and fentanyl, potentially setting a balanced tone for their early interactions.

"Positive sentiment was further supported as TikTok resumed operations in the US on Sunday, after Trump announced a three-month delay in enforcing a law requiring its Chinese owner to secure a buyer."

Elsewhere, Bank of Japan officials indicated a strong possibility of raising interest rates, Patrick Munnelly noted, contingent on Trump avoiding immediate disruptive policies.

Most markets rise as investors brace for Trump inauguration

In Hong Kong, the Hang Seng Index rose 1.75% to 19,925.81, reaching its highest level since the end of December before trimming gains.

The rally was driven by consumer cyclicals and health-care stocks, with JD.com climbing 7.29%, WuXi AppTec up 7.23%, and Meituan advancing 5.21%.

Japan's Nikkei 225 advanced 1.17% to close at 38,902.50, buoyed by strong performances from Daiichi Sankyo, which surged 8.23%, Taiheiyo Cement rising 4.24%, and robotics firm Fanuc Corporation gaining 3.98%.

The broader Topix index similarly gained in Tokyo, rising 1.19% to settle at 2,711.27.

In China, the Shanghai Composite added 0.08% to 3,244.38, while the Shenzhen Component climbed 0.94%.

Leading gainers in Shanghai included Jiangsu High Hope International Group, which jumped 10.18%, Lotus Health Group rising 10.11%, and Far East Smarter Energy up 10.04%/

South Korea's Kospi 100 declined by 0.38% to 2,517.30, weighed down by losses in major industrial stocks.

Hyundai Electric Energy Systems dropped 7.89%, HMM Co fell 7.36%, and LS Industrial Systems declined 5.62%.

In Australia, the S&P/ASX 200 gained 0.45% to close at 8,347.40, supported by strong performances in the energy and financial sectors.

Contact Energy led gains with a 9.26% increase, followed by Iress rising 6.17% and BSP Financial Group climbing 5.56%.

Across the Tasman Sea, New Zealand's S&P/NZX 50 slipped 0.32% to 13,088.31, with retail and infrastructure stocks under pressure.

KMD Brands tumbled 9.2%, Vector lost 3.38%, and Precinct Properties New Zealand declined 3.2%.

In currency markets, the dollar was last down 0.04% on the yen, trading at JPY 156.23, as it weakened 0.12% against the Aussie to AUD 1.6128, and retreated 0.28% from the Kiwi, changing hands at NZD 1.7854.

Oil prices meanwhile remained subdued, with Brent crude futures last down 0.24% on ICE to $80.60 per barrel, and the NYMEX quote for West Texas Intermediate dipping 0.22% to $77.71.

China keeps key lending rates steady ahead of regional central bank meetings

In economic news, China kept its benchmark lending rates unchanged on Monday as authorities navigated a weakening yuan and awaited policy direction from the incoming Trump administration in the US.

The People's Bank of China maintained the one-year loan prime rate at 3.1% and the five-year rate at 3.6%.

The one-year LPR influences corporate and household borrowing costs, while the five-year rate serves as a key reference for mortgage lending.

Attention was now shifting to upcoming monetary policy decisions across Asia.

Malaysia's central bank is widely expected to hold its policy rate at 3% when it meets on Wednesday.

Meanwhile, the Bank of Japan will convene from 23 to 24 January, with governor Kazuo Ueda having indicated a possible rate hike.

Singapore's central bank is also set to meet on Friday, with investors closely watching for any policy adjustments.

In South Korea, the finance ministry announced plans to provide a record KRW 360trn in financial support to exporters, amid uncertainties surrounding Trump's second term.

The government said it would also raise exchange rate insurance support to KRW 1.4trn won this year, from KRW 1.2trn in 2024.

Officials highlighted semiconductors and rechargeable batteries as sectors facing heightened risks from potential changes in US trade policies.

Reporting by Josh White for Sharecast.com.