Asian equity markets delivered a mixed performance in Thursday morning trade, as investors balanced optimism in South Korea and Hong Kong against weakness in Japan. Holiday closures across key financial centers, including China and India, kept trading volumes lighter, while currency fluctuations added another layer of uncertainty.

South Korea and Hong Kong Take the Lead

South Korea’s KOSPI Composite Index advanced 0.91% to 3,455.83, marking one of the region’s strongest performers at the open. Technology and auto shares drove the gains, with institutional investors continuing to rotate into cyclical stocks amid expectations of stronger corporate earnings.

In Hong Kong, the Hang Seng Index gained 0.87% to 26,855.56, extending a rebound from earlier in the week. Analysts point to steady inflows into property and financials as Beijing continues to signal support for the broader Chinese economy. However, thin participation due to China’s holiday may limit the sustainability of today’s move.

India’s markets were closed for Mahatma Gandhi Jayanti, which paused trading on the National Stock Exchange and the BSE. Still, expectations remain high for continued flows into Indian equities once trading resumes, given the benchmark SENSEX’s strong year-to-date rally.

Japan’s Nikkei Slips Amid Yen Strength

In contrast to the upbeat tone in Korea and Hong Kong, Japan’s Nikkei 225 slid 0.85% to 44,550.85. The weakness was largely attributed to a firmer Japanese Yen Index, which rose 0.54% to 67.99, weighing heavily on exporters.

The yen’s rise reflects cautious sentiment among investors who remain watchful of global bond yields and potential intervention from Japan’s Ministry of Finance. Export-driven sectors such as autos and electronics were the biggest drags on the Nikkei in early trade.

Despite the pullback, market watchers believe Japan’s equities could regain momentum if the yen stabilizes and global risk appetite remains intact.

China and Regional Holiday Impact

Trading activity across Asia was also affected by multiple holiday closures. The Shanghai Stock Exchange and the Shenzhen Stock Exchange are shut for National Day celebrations, while the Dhaka Stock Exchange in Bangladesh remains closed for Durga Puja.

These closures reduce liquidity in the region, leading to lighter volumes and potentially exaggerated price swings in open markets. Market strategists note that once Chinese markets reopen, the direction of mainland equities will be critical in shaping sentiment across Asia.

Elsewhere, the SSE Composite Index, which last closed at 3,882.78, will remain paused during the extended break. Investors are likely to look for cues on government stimulus, property market stability, and export demand when Chinese equities return to trading.

Currencies and Commodities Influence Market Moves

Currency shifts also played a role in today’s trading dynamics. The Australian Dollar Index was little changed at 66.13, while Australia’s S&P/ASX 200 edged down 0.04% to 8,845.70. Mining and energy stocks weighed on the index, offsetting gains in banking shares.

The muted tone in Australia highlights investor caution ahead of key global economic data releases later this week. Commodity-linked currencies like the Australian dollar are particularly sensitive to shifts in demand expectations from China, which is on holiday, reducing near-term catalysts.

Outlook for Investors

Looking ahead, Asian markets are likely to remain sensitive to currency fluctuations, particularly the yen and Australian dollar, as well as developments in U.S. bond yields and Federal Reserve policy expectations. Once Chinese and Indian markets reopen after their respective holidays, trading volumes should normalize, offering clearer signals for regional momentum.

Key risks to monitor include yen volatility, further weakness in Japanese equities, and global growth signals from upcoming economic data releases. On the opportunity side, South Korea and Hong Kong are showing resilience, suggesting selective buying could continue in these markets if global conditions stabilize.