Divergent Trends and Cautious Sentiment in China and Japan

Indices

Asian equity markets are displaying contrasting performances as regional investors respond to a blend of domestic developments and global headwinds. In Japan, the Nikkei 225 (^N225) is trading at 47950.88, having edged up slightly by 0.01276469 today, indicating a stabilizing momentum after recent bullish moves. This price is near its 52-week high of 48527.33, suggesting persistent investor optimism, although the micro-trend signal remains FLAT, highlighting a lack of strong directional conviction in the immediate term.

In Hong Kong, the Hang Seng Index (^HSI) is at 26957.77, down by -0.67481. This movement reflects subdued sentiment among Hong Kong investors, as the index hovers close to its year high but remains under pressure from recent volatility and a FLAT micro-trend signal.

Chinese indices such as the SSE Composite Index (000001.SS) are showing modest upward momentum, currently at 3882.7773 with a 0.52415 gain, signaling cautious optimism among mainland investors.

Stocks

Sector rotation is evident in both markets. In China, mining and technology are leading, with Zijin Mining Group (HK:2899) rising by 6.38 and NetEase (HK:9999) up 6.04, indicating a pivot toward more resilient or defensive sectors. However, Chinese electric vehicle makers such as NIO Inc. (NIO/HK:9866), Geely Automobile (HK:0175), and BYD (HK:1211) have suffered declines between -5and -9, reflecting intense industry competition and regulatory scrutiny.

In Japan, Disco Corp. (TYO:6146) leads with a 7.5 gain, followed by Sumitomo Metal Mining (TYO:5713) at 6.87 and Sumitomo Pharma (TYO:4506) at 6.62, suggesting renewed interest in industrial and healthcare names. Conversely, semiconductor heavyweights Tokyo Electron (TYO:8035) and Advantest Corp. (TYO:6857) fell -6.5 and -7.6 respectively, underscoring sector-specific headwinds from global supply chain and geopolitical uncertainties.

Economic News

Recent data in Japan points to a contraction in the manufacturing sector, as the September PMI declined to 48.5 from 49.7. This drop signals weakening demand and negative effects from US tariffs, though the BOJ’s Tankan index for large manufacturers improved to 14, hinting at underlying resilience.

In China, the World Bank has raised the 2025 GDP growth forecast to 4.8, up from 4.0%, suggesting improved near-term prospects. However, Q2 GDP growth registered at 5.2, and recent holiday data showed softer-than-expected consumption, fuelling concerns about the sustainability of the recovery.

Economic Events

Key economic events this week include the National People's Congress in China starting October 8, which is expected to provide policy guidance and potential support measures. In Japan, the Bank of Japan holds its policy meeting at month-end, with markets expecting the central bank to maintain its current stance. Upcoming Japanese macro releases, including household spending and leading economic indicators, will be closely watched for shifts in momentum.

Market Sentiment

Investor sentiment remains mixed across the region. In Japan, the Nikkei 225’s strength and the BOJ’s cautious optimism reflect confidence in political leadership and policy continuity, though FLAT micro-trend signals suggest underlying caution. In China, short-term optimism driven by upward GDP revisions is offset by worries over regulatory actions and economic momentum, especially in the electric vehicle sector. Hong Kong sentiment remains subdued, as evidenced by recent Hang Seng Index losses and a flat trend.

Please note that the analysis is for informational purposes only and does not constitute financial advice. Users should conduct their own research.