Asian Stocks Surge Amid Rate Cut Hopes and Indian Election Cheer

Infotrading.io - Asian stocks experienced a substantial rally on Monday, driven by speculation over potential interest rate cuts by major central banks, which invigorated investor appetite for risk-driven assets. Technology-heavy indexes led the charge, particularly those boosted by the semiconductor sector following NVIDIA Corporation's (NASDAQ: NVDA) announcement of a new line of artificial intelligence chips. This development came on the heels of NVIDIA's impressive quarterly earnings, underscoring robust demand within the rapidly expanding AI industry.

India's Nifty 50 index was a standout performer, soaring to record highs as exit polls indicated a decisive victory for the NDA alliance, spearheaded by the BJP party, in the 2024 general elections. This surge was mirrored by regional stocks, which tracked a strong finish on Wall Street from the previous Friday. An in-line reading on a key inflation indicator bolstered traders' expectations for a September interest rate cut by the Federal Reserve, further lifting U.S. stock index futures in Asian trade.

The week ahead is pivotal, with significant focus on interest rate decisions from the European Central Bank (ECB) and the Bank of Canada. Both institutions are anticipated to commence rate reductions, potentially igniting a wave of monetary easing worldwide. Although the Federal Reserve is expected to maintain current rates in its upcoming meeting, the market remains optimistic about future cuts.

Asian Tech Stocks Lead Gains on AI Hype

Hong Kong’s Hang Seng index and South Korea’s KOSPI were notable gainers, each surging between 2% and 2.5%. Semiconductor stocks, including Semiconductor Manufacturing International Corp (HK:0981) and SK Hynix Inc (KS:000660), registered significant gains following the Nvidia announcement. Taiwan's Weighted index saw a 1.9% increase, propelled by a nearly 4% jump in TSMC (TW:2330), Nvidia's primary supplier, benefiting greatly from the AI boom and reaching record highs.

In Japan, the Nikkei 225 index rose by 0.8%, while Australia's ASX 200 saw a 0.7% increase, both driven by gains in the technology sector.

India's Nifty 50 Hits Record High on Election Cheer

India's Nifty 50 index surged by as much as 3%, hitting a record high of 23,321 points. This rally was driven by exit polls predicting a victory for the NDA alliance, led by the BJP party, in the 2024 general elections. This victory would mark a third consecutive term for Prime Minister Narendra Modi.

The strength in the Nifty was signaled by a spike in Gift Nifty 50 Futures, which surged about 3.5% before the market opened. Both local and foreign investors have generally favored Modi's pro-business policies, which have fueled significant economic growth in India and driven the Nifty 50 to multiple record highs. Stocks in manufacturing and infrastructure sectors are poised to benefit from another BJP term. The official election results are expected on Tuesday morning.

Chinese Stocks Lag Amid Mixed PMIs

Chinese stock markets underperformed their regional peers, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes showing only marginal gains. Recent Purchasing Managers' Index (PMI) data offered a mixed view of China's economy. Private PMI data indicated better-than-expected growth in the manufacturing sector for May, marking the seventh consecutive month of expansion. However, this was in stark contrast to the official PMI data released last week, which reported an unexpected contraction in the manufacturing sector.

The surge in Asian stocks reflects a complex interplay of factors, including speculation on global interest rate cuts, strong performances by technology stocks, and significant political developments in India. The market's response to these dynamics highlights the importance of monitoring central bank decisions and political outcomes, which can significantly impact investor sentiment and market performance.