Asian financial markets closed the week on a cautious note as investors balanced optimism over China’s tentative economic rebound with renewed concerns about global interest rates. While equity indices across the region showed resilience, currency markets and bond yields reflected persistent uncertainty about monetary policy and global demand.
China’s cautious rebound supports sentiment
Chinese stocks posted modest weekly gains, buoyed by signs of stabilisation in manufacturing and a rebound in consumer spending during the country’s Golden Week holiday. The Shanghai Composite advanced 1.3 per cent, while Hong Kong’s Hang Seng Index rose 0.9 per cent, supported by strong performance in technology and property shares.
However, analysts warned that the recovery remains fragile. Factory output and export figures improved slightly, but youth unemployment and weak private investment continue to weigh on confidence. The People’s Bank of China maintained its policy rate but signalled readiness to provide additional liquidity should deflationary pressures persist.
Market strategists said Beijing’s gradual approach suggests a focus on long-term stability rather than short-term stimulus, with targeted support for advanced manufacturing, green energy, and semiconductor production.
Japan’s yen weakens as the yield gap widens
In Tokyo, the Nikkei 225 fluctuated throughout the week, ending nearly flat after a sharp midweek rally. The Japanese yen weakened to its lowest level in months against the US dollar, prompting speculation about possible intervention by the Bank of Japan. Investors remain wary that the widening yield gap between Japan and the United States could trigger further currency depreciation.
Government bond yields in Japan edged higher, reflecting expectations that the central bank may move toward policy normalisation later this year. Exporters, however, benefited from the weaker yen, cushioning the overall impact on equities.
India maintains growth momentum
India’s financial markets extended their strong performance, with the BSE Sensex climbing 1.5 per cent for the week, reaching new record highs. The rally was driven by financials, infrastructure, and consumer stocks, as investors expressed confidence in India’s steady economic expansion and robust corporate earnings.
The rupee remained relatively stable, supported by foreign inflows and central bank interventions aimed at curbing volatility. Economists continue to project India as the fastest-growing major economy in 2025, with GDP expected to expand by more than 6.5 per cent this year.
Regional currencies under pressure
Across Southeast Asia, currencies were mixed. The Thai baht and Malaysian ringgit both slipped against the dollar amid concerns over slowing export demand, while Indonesia’s rupiah held firm as the central bank reaffirmed its commitment to currency stability.
Bond markets saw moderate outflows as investors shifted toward higher-yielding assets in the United States. Analysts noted that Asian central banks are increasingly coordinating policy responses to shield their economies from global capital volatility and maintain fiscal discipline ahead of 2026 budget cycles.
Outlook: cautious optimism amid shifting global tides
Despite short-term fluctuations, sentiment across Asian markets remains cautiously positive. The region’s fundamentals — strong demographics, expanding digital sectors, and growing domestic consumption — continue to attract global investors seeking long-term exposure.
However, analysts warn that further volatility is likely as the world’s major central banks debate interest rate trajectories and trade tensions between the US and China resurface. For Asia’s policymakers, the challenge ahead lies in maintaining economic momentum without reigniting inflation or destabilising exchange rates.
Newshub Editorial in Asia – 5 October 2025
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