Nikkei and Kospi: Asian stock markets are rising - interest rate hopes outweigh Middle East concerns

The prospect of an interest rate pause in the US and ongoing enthusiasm for artificial intelligence (AI) sparked optimism on Asian stock markets at the end of the week. The broad MSCI index for Asia-Pacific stocks outside Japan rose by 0.28 percent and was heading for the strongest weekly gain since mid-June. In Tokyo, the Japanese benchmark Nikkei gained 1.5 percent.

Investors also bought into South Korea: the benchmark Kospi rose by 0.82 percent to 6868.89 points, ending a seven-week losing streak. Despite stalled peace talks in the Middle East and the US threat to increase economic pressure on Iran, including a naval blockade, investors largely ignored geopolitical risks. "Markets seem to be willing to tolerate a significant degree of uncertainty for now without demanding higher risk premiums," said John Sidawi, portfolio manager at Federated Hermes.

In South Korea, tech stocks benefited from AI enthusiasm: while shares of chipmaker SK Hynix rose by 3.01 percent, those of rival Samsung Electronics fell by 0.37 percent. The winners also included automakers Hyundai Motor and Kia, with gains of 5.73 and 1.97 percent. In China, the central bank's actions were in focus. The People's Bank of China (PBOC) pumped 349 billion yuan into the banking system, signaling tighter control over short-term interest rates.

Meanwhile, Charu Chanana, investment strategist at Saxo, warned against excessive optimism in Asian markets, as the rally was largely driven by headlines. "Without clarity on the Middle East, another oil price spike could quickly revive inflation and interest rate concerns," Chanana explained. An escalation of the conflict could prompt investors to take action and trigger significantly higher volatility.