Asian equity markets closed Monday, January 26, 2026, with a mixed and cautious tone as investors reassessed risk following last week’s rebound. A sharp appreciation in the Japanese yen triggered selling in Japan’s equity market, setting a negative tone for export-heavy sectors across the region. Elsewhere, mainland China and Hong Kong showed resilience, while South Korea and India extended recent weakness.

The session reflected growing selectivity among investors as currency movements and valuation considerations took center stage. With earnings season approaching and global macro signals still uneven, traders appeared less willing to extend risk aggressively, opting instead for a more defensive and differentiated approach across Asian markets.

Japan Slides Sharply as Yen Strength Pressures Exporters

Japan’s Nikkei 225 fell 1.79% to 52,885.25, marking one of the weakest performances in the region. The decline came as the Japanese Yen Index surged 1.74% to 64.23, sharply reducing currency support for exporters and overseas earnings. Automakers, industrials, and technology stocks led the losses as investors reacted swiftly to the stronger yen.

The move highlighted Japan’s sensitivity to currency dynamics, particularly after the Nikkei’s strong run earlier in the month. While the yen’s strength reflects improving confidence in Japan’s macro stability, equity investors viewed the sudden appreciation as a near-term headwind for corporate profitability. The sell-off suggested that markets are recalibrating expectations after the rapid gains seen earlier in January.

China and Hong Kong Show Resilience Amid Regional Volatility

China’s SSE Composite Index edged down just 0.09% to 4,132.60, effectively holding steady despite broader regional pressure. Financials and infrastructure-linked stocks helped limit losses, underscoring continued confidence in policy support and liquidity conditions. The muted move suggested that investors remain willing to maintain exposure to mainland equities, even as volatility picks up elsewhere in Asia.

Hong Kong’s Hang Seng Index added 0.06% to 26,765.52, posting a marginal gain. Financial and technology stocks were mixed, but the index benefited from stability in mainland China and easing selling pressure. While gains were limited, Hong Kong’s ability to close higher stood out against declines in several other major markets, pointing to tentative stabilization in China-linked assets.

South Korea and India Extend Pullback as Risk Appetite Softens

South Korea’s KOSPI Composite Index declined 0.81% to 4,949.59, continuing a pullback from recent highs. Technology and semiconductor stocks faced selling pressure as investors trimmed exposure following strong early-year performance. The move appeared corrective, reflecting profit-taking rather than a shift in longer-term sentiment, but it underscored growing caution across export-oriented markets.

India’s S&P BSE Sensex fell 0.94% to 81,537.70, extending recent underperformance. Financials and IT stocks led the decline as investors remained wary of valuations amid ongoing volatility. Despite the short-term weakness, India’s broader growth narrative remains intact, though near-term sentiment continues to favor consolidation.

Australia Closed as Currency Strength Signals Risk Repricing

Australia’s equity market was closed, leaving the S&P/ASX 200 unchanged at 8,860.10. However, the Australian Dollar Index rose 0.78% to 68.93, reflecting stronger demand for risk-linked currencies. While currency strength often signals improving global sentiment, it can also prompt equity investors to reassess exporter exposure, particularly once markets reopen.

The divergence between currency strength and equity performance elsewhere in the region highlighted the complex interplay between foreign-exchange moves and stock valuations at this stage of the cycle.

Outlook: Currency Volatility Takes Center Stage as Earnings Near

Looking ahead, Asian markets are likely to remain sensitive to currency movements, particularly in the yen and regional commodity-linked currencies, as investors reassess earnings assumptions. Upcoming corporate results and guidance will be critical in determining whether recent equity pullbacks remain contained or deepen further. While China and Hong Kong appear relatively stable, export-heavy markets may face continued pressure if currencies remain volatile. For now, the mixed close suggests a market transitioning into a more cautious, earnings-driven phase as January draws to a close.