Asia report: Markets mixed as Bank of Korea holds rates

(Sharecast News) - Asia-Pacific markets ended mixed on Thursday as investors assessed the Bank of Korea's latest policy decision and digested corporate earnings across the region. South Korea's central bank kept its benchmark rate unchanged at 2.5% for a second consecutive meeting, as expected, citing global trade uncertainty.

Patrick Munnelly, market strategy partner at TickMill, noted that "stocks largely brushed off the initial impact of Nvidia's sales forecast falling short of lofty expectations, suggesting that the momentum of the record-breaking rally remains strong."

He added that while Nvidia's shares fell 3% in after-hours trading, "Chinese technology stocks experienced significant gains," contributing to broader market resilience.

Markets mixed after Bank of Korea's decision

In Seoul, the Kospi 100 rose 0.33% to 3,233.26, led by HD Korea Shipbuilding & Offshore Engineering, up 10.55%, SK Holdings, up 9.44%, and SK Square, up 6.93%.

Japan's Nikkei 225 advanced 0.76% to 42,842.00, with Fujikura climbing 5.52%, Inpex adding 4.33%, and Alps Electric up 4.28%.

The broader Topix index gained 0.65% to 3,089.78.

Munnelly pointed out that "in Japan, a Thursday auction for two-year government bonds saw weaker demand than the average over the past year, as investors are wary of potential interest rate hikes by the Bank of Japan this year."

Mainland Chinese equities outperformed, with the Shanghai Composite rising 1.14% to 3,843.60 and the Shenzhen Component climbing 2.25% to 12,571.37.

Zhejiang Tuna Environmental Science & Technology, Apple Flavor & Fragrance Group, and Keeson Technology all hit the 10% upside limit.

"In China, semiconductor stocks surged, with SMIC jumping by 12% after reports indicated local firms plan to boost AI chip production next year," Munnelly said.

By contrast, Hong Kong's Hang Seng Index fell 0.81% to 24,998.82, dragged lower by Meituan, down 12.55%, ANTA Sports Products, off 5.91%, and JD.com, down 5.03%.

In Australia, the S&P/ASX 200 rose 0.22% to 8,980.00, lifted by Qantas Airways, which gained 9.09% after reporting a 15% rise in underlying profit before tax to AUD 2.39bn, beating estimates.

Revenue grew 8.6% to AUD 23.82bn for the year ended 30 June.

AP Eagers jumped 12.02% and Generation Development Group added 6.75%.

Across the Tasman Sea, New Zealand's S&P/NZX 50 index gained 0.32% to 12,903.08, supported by Meridian Energy, up 3.51%, A2 Milk Company, up 3.5%, and Sky Network Television, up 2.9%.

In currencies, the dollar was last down 0.2% on the yen to trade at JPY 147.13, as it fell 0.21% against the Aussie to AUD 1.5339, and eased 0.12% on the Kiwi to change hands at NZD 1.7048.

Munnelly observed that "August has been relatively calm for currency markets, with limited follow-through on larger intraday moves driven by data or events," noting that had led to "a self-reinforcing cycle, with range-bound markets discouraging directional positioning, especially for negative carry trades."

Oil prices retreated, with Brent crude futures last down 0.75% on ICE at $67.54 per barrel, and the NYMEX quote for West Texas Intermediate falling 0.75% to $63.67.

Bank of Korea holds rates, NZ business confidence mixed

At the top of the economic agenda in the region was South Korea's central bank, which left interest rates unchanged on Thursday as policymakers weighed rising housing prices and the outlook for economic growth.

The Bank of Korea held its benchmark rate at 2.5% for a second consecutive meeting, in line with market expectations, while noting that inflation remained stable and growth had shown "modest improvement."

However, it warned that household debt and housing prices in Seoul and surrounding regions required close monitoring despite a recent slowdown in loan growth.

The bank raised its 2025 inflation forecast to 2% from 1.9% previously and upgraded its GDP growth projection to 0.9% from 0.8%.

It said it expected domestic demand to recover modestly on the back of improved consumer sentiment and a supplementary budget.

Exports, which account for 44% of South Korea's GDP, were expected to perform well in the short term before gradually slowing as the impact of US tariffs spreads.

Thursday's decision followed a high-profile meeting earlier this week between South Korean president Lee Jae Myung and US president Donald Trump, which produced multibillion-dollar investment pledges from South Korean companies, a record $50bn aviation order by Korean Air, and expanded cooperation in shipbuilding and energy.

A July trade agreement also saw Seoul pledge $350bn of US investment, including $150bn for shipbuilding, in exchange for a cut in reciprocal US tariffs on South Korean exports to 15% from 25%.

Bank of America analysts said the Bank of Korea could deliver a rate cut as early as October, with another reduction expected in the first half of 2026 to stabilise rates at 2%. Inflation in July came in at 2.1%, close to the bank's 2% target.

In New Zealand, fresh business confidence surveys offered a mixed view of the economy.

The ANZ Business Outlook for August showed headline confidence rising two points to a net 50%, but firms' expectations for their own activity fell two points to a net 39%.

Meanwhile, the MYOB Business Monitor found 39% of small and mid-sized enterprises expected the economy to deteriorate over the next year, compared with 36% who saw it improving, marking a shift from earlier in 2025 when optimism had been stronger.

Forward-looking indicators in the ANZ survey remained mixed, with past activity negative for retail, construction and manufacturing, and past employment falling sharply in the construction sector.

Inflation pressures, however, continued to ease, with one-year-ahead expectations edging down to 2.6% and wage growth indicators also declining.

Reporting by Josh White for Sharecast.com.