Asian equity markets closed Thursday, February 5, 2026, under renewed pressure as investor sentiment turned cautious following recent volatility and a strong rebound earlier in the week. Selling was broad-based across North Asia, with South Korea recording the steepest decline as investors aggressively locked in gains after an outsized rally. Currency weakness across the region reinforced the defensive tone, adding pressure to risk-sensitive assets.

The session reflected a market recalibrating after sharp sentiment swings, with investors shifting from momentum-driven positioning toward preservation of recent gains. While losses were widespread, their uneven scale underscored a selective risk-off phase rather than a disorderly retreat.

South Korea Leads Declines as Profit-Taking Accelerates

South Korea was the clear regional laggard. The KOSPI Composite Index plunged 3.86% to 5,163.57, marking its sharpest decline in recent sessions. The sell-off followed several days of strong gains and was driven primarily by profit-taking in technology and semiconductor stocks, which had led the earlier rally.

Export-oriented names and financials also came under pressure as investors reassessed exposure amid rising volatility. The magnitude of the move highlighted the KOSPI’s sensitivity to shifts in global risk appetite, particularly after rapid advances. While medium-term fundamentals remain constructive, the pace of the prior rally left the market vulnerable to near-term correction.

Japan and China Retreat as Caution Spreads

Japan’s Nikkei 225 declined 0.88% to 53,818.04, extending its pullback after recent highs. Exporters and industrial stocks led losses as the Japanese Yen Index slid 0.70%, undermining near-term earnings support. Investors appeared increasingly cautious, trimming positions ahead of further global macro signals.

China’s SSE Composite Index fell 0.64% to 4,075.92, weighed down by weakness in financials and consumer stocks. The move reflected lingering hesitation following recent volatility, despite ongoing expectations of policy support. The softer close added pressure to broader regional sentiment, given China’s central role in Asia’s growth outlook.

Australia and India Join the Pullback

Australia’s S&P/ASX 200 slipped 0.43% to 8,889.20, pressured by declines in mining and banking stocks. The pullback coincided with a 0.29% drop in the Australian Dollar Index, signaling reduced appetite for risk-linked assets. While the decline was orderly, it reinforced the defensive tone spreading across the region.

India’s S&P BSE Sensex fell 0.58% to 83,331.58, as selling returned to financials and IT stocks. The move reflected valuation sensitivity and broader de-risking rather than deterioration in domestic fundamentals, which continue to support India’s longer-term outlook.

Hong Kong Shows Relative Resilience

Hong Kong’s Hang Seng Index edged up 0.14% to 26,885.24, outperforming regional peers but lacking momentum. Gains in select financial stocks helped offset weakness in technology and consumer names, resulting in a marginally positive close.

The muted performance suggested cautious positioning toward China-linked assets, with investors reluctant to add exposure despite relative stability compared with other North Asian markets.

Currency Weakness Adds Pressure; Pakistan Market Closed

Regional currencies weakened in tandem with equities. Both the Japanese yen and Australian dollar declined, reducing support for exporters and reinforcing the broader risk-off tone. The synchronized weakness across currencies and stocks reflected renewed caution around global growth and capital flows.

Elsewhere, the Pakistan Stock Exchange remained closed in observance of Kashmir Day, slightly reducing South Asian market participation. The closure had limited direct impact on regional pricing but contributed to lighter overall trading activity.

Outlook

Asian markets may remain volatile in the near term as investors continue to rebalance after sharp moves earlier in the week. Attention will turn to upcoming economic data, earnings updates, and central bank communication for clearer direction. While near-term pressure is likely to persist, the current pullback appears driven more by positioning and profit-taking than by a breakdown in fundamentals. If global conditions stabilize and currency pressures ease, selective buying could re-emerge, though investors are likely to remain cautious and highly discriminating in the sessions ahead.