Asian stocks rebound as KOSPI rises, but weekly losses linger on bond, oil risks

Asian stocks experienced a generally positive trend on Friday, with South Korea playing a key role in the late-week rebound, as technology shares showed signs of recovery. However, the week ended on a negative note for most regional benchmarks due to mounting concerns over global bond markets and higher oil prices. U.S. Treasury yields climbed back up after the Wednesday buyback announcement, which provided only a temporary break, with the 10-year yield hovering around 4.7% and the 30-year near 5.3%.

Wall Street also faced losses the previous day as rising yields, heightened oil prices, and worries about U.S. debt negatively impacted risk appetite. Treasury Secretary Scott Bessent indicated that buybacks could potentially exceed the planned $4 billion per operation, alongside a larger fiscal-consolidation strategy. Investors, however, remain doubtful that these measures will effectively tackle a U.S. budget deficit exceeding 6% of GDP and annual interest costs of approximately $1.2 trillion.

Asian trading proved more resilient, with the Nasdaq 100 Futures up around 0.6% and S&P 500 Futures increasing by 0.2%, suggesting a slight stabilization after the overnight decline. The MSCI AC Asia Pacific index climbed by about 0.7%, but it was still on track for a weaker week. Japan, along with South Korea, was anticipated to report a weekly decline, while Hong Kong bucked the trend.

The KOSPI recovered from earlier losses to trade nearly 1% higher, yet it remained about 1% lower for the week. This rebound can be attributed to the positive performance of Korean semiconductor stocks following the previous day's sell-off. SK Hynix saw a gain of about 3% on Friday and around 7% over the week, while Samsung Electronics was up roughly 2% for the week.

These two stocks have been among the most influential factors in the KOSPI's fluctuations this week, as SK Hynix announced a 40 trillion-won share buyback and Samsung was reportedly preparing a potential 110 trillion-won shareholder-return package. Japan's Nikkei 225 fell by about 0.8% and remained down roughly 4.4% for the week, making it one of the region's weakest major indices.

This decline occurred as investors continued to grapple with rising Japanese inflation and its potential impact on Bank of Japan policy. The July core CPI in Japan surged 1.8% year-on-year, supporting expectations that the BOJ might raise interest rates as early as September. Hong Kong emerged as a standout performer, with the Hang Seng index climbing by around 3% for the week, ending a two-week losing streak, even though Friday's trading remained cautious due to recent developments in global technology shares.

Alibaba shares fell by 3% after reporting a more than 75% drop in quarterly profit, as capital spending surged by 75% to nearly $10 billion, driven by an aggressive expansion into AI infrastructure. Henderson Land also experienced a gain of over 7% after delivering strong first-half results, providing a stock-specific positive element to Hong Kong's trading activity.

Oil prices continued to be elevated as diplomatic efforts in the Middle East showed little progress. Brent crude reached a one-month high of $94.71 before settling at around $93.12, marking a more than 5% increase for the week. The recent U.S. pressure on Iran, including threats of stricter sanctions, has further dampened hopes for a complete reopening of the Strait of Hormuz.

Bank Indonesia maintained its seven-day reverse-repurchase rate at 5.75% on Wednesday, as expected, marking the first policy decision under acting Governor Destry Damayanti. The Jakarta Stock Exchange Composite Index rose by 0.5% on Friday and is on track to conclude the week over 2% higher. India's Nifty 50 started the day slightly higher and remained around 0.4% lower for the week.

Australia's S&P/ASX 200 also saw a slight decline of 0.4%. China's Shanghai and Shenzhen CSI 300 indices both gained 0.5%, while the Shanghai Composite remained relatively unchanged. The focus has now shifted to Nvidia's earnings and next week's Jackson Hole symposium, which will serve as a significant test for the technology trade and the Federal Reserve's outlook.