Asian stock markets all rose, Japanese and Korean stock markets hit new highs, SK Hynix rose more than 3%, and silver rose more than 3% during the day.

# Source: Wall Street Insights  By Zhang Yaqi

South Korea’s KOSPI broke through the 4,500-point mark. SK Hynix rose 3.3%, hitting an all-time high. Japan’s Nikkei 225 gained over 1%, approaching the record high set last year. The Tokyo Stock Price Index (TOPIX) also notched a new record. Gold edged up 0.2% to climb above $4,460 per ounce, while silver surged more than 3% intraday.

Asian stock markets hit historic highs on Tuesday, led by technology stocks, as investors shifted capital from the highly-valued U.S. market to Asia in pursuit of more attractive valuations and stronger growth prospects.

The MSCI Asia Pacific Index advanced 1.1%, with gainers outnumbering losers by a ratio of more than 2-to-1. U.S. and European equity futures also traded higher, signaling the upward momentum was poised to extend. Despite the tense situation in Venezuela, investor enthusiasm for equities showed no signs of fading, extending the three-year bull run fueled by demand for technology and artificial intelligence-related stocks. Since the market low in April last year, expectations of Federal Reserve interest rate cuts and optimism over AI-driven corporate earnings have boosted market confidence.

South Korea’s KOSPI breached the 4,500-point threshold. SK Hynix jumped 3.3%, setting a new all-time high.

Japan’s Nikkei 225 climbed over 1%, closing in on the record peak achieved last year. The Tokyo Stock Price Index (TOPIX) hit a fresh record high.

Taiwan’s Capitalization Weighted Stock Index rose 1.4% to 30,511.610 points, reaching an all-time high.

Singapore’s Straits Times Index touched an intraday record high. The MSCI Asia Pacific Index gained 1% to 236.82 points.

U.S. Treasury yields ticked slightly higher, with the benchmark 10-year Treasury yield rising nearly 2 basis points to 4.18%.

Gold inched up 0.2% to move above $4,460 per ounce, and silver rallied more than 3% within the day.

## Valuation Gap Drives Capital Shift

Even after three consecutive years of gains, Asian equities remain relatively cheap compared to U.S. tech stocks. The MSCI Asia Pacific Index trades at a price-to-earnings ratio of 15 times, while the S&P 500 stands at 22 times and the Nasdaq 100 at a lofty 25 times.

The Japanese market delivered particularly standout performance, with the TOPIX surging over 1.4%. Hideyuki Ishiguro, Chief Strategist at Nomura Asset Management, noted that retail investors’ New Year stock-buying activity may have driven part of the gains. Tomo Kinoshita, Global Market Strategist at Invesco Asset Management, argued that many foreign investors are likely to re-enter the Japanese market in the New Year, as the pressure to rebalance portfolios before the end of 2025 has subsided.

Billy Leung, Investment Strategist at Global X Management, commented:

"Valuations across most of Asia remain reasonable relative to growth, while U.S. tech stocks are already fully owned. This is not a speculative January rally, but more like an early repositioning toward Asia’s growth and AI cycle. Earnings performance will be the key test ahead."

Bloomberg strategists pointed out that investors are clearly eager to pour into stocks, including AI-related names, but they seem reluctant to make large bets on U.S. equities. This may be because U.S. stock valuations are elevated relative to their own long-term averages and all major Asian benchmark indices.

## Policy Tailwinds Support Risk Assets

In a report released on Monday, Serena Tang and Seth Carpenter of Morgan Stanley wrote that this year will be a "strong year for risk assets", as the triple combination of fiscal, monetary and regulatory policy easing will work together in a pro-cyclical manner.

For equity markets, particularly in the U.S., the main themes will be stronger earnings growth and broader market leadership, while a recovery in AI financing and merger and acquisition activities will take center stage in the credit market. The institution maintains an overweight stance on global equities. Adrian Helfert, Chief Investment Officer at Westwood, said:

"The bullish case for stocks remains intact. Barring cascading geopolitical events, broader market leadership should largely look past the situation in Venezuela."

In other market segments, the Bloomberg Dollar Index fell for the second consecutive day. U.S. Treasury yields edged higher, with the benchmark 10-year yield rising nearly 2 basis points to 4.18%. U.S. manufacturing activity contracted in December at the sharpest pace since 2024, reinforcing the case for further policy easing by the Federal Reserve and weighing on yields earlier in the session.

Precious metals reversed their early weakness. Gold ticked up 0.2% to climb above $4,460 per ounce, while silver jumped more than 3% intraday. Oil prices stabilized after posting their biggest weekly gain in a week.

More updates to follow...

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