Asian equity markets ended Monday’s session mixed and subdued, reflecting thin holiday liquidity and cautious positioning after a lackluster post-Christmas close on Wall Street. While geopolitical tensions around Taiwan intensified, regional investors largely refrained from aggressive moves, suggesting that risk appetite remains selective rather than defensive as the year draws to a close.

The muted tone underscores a familiar late-December dynamic: headline risks persist, but with many institutional players sidelined, markets are more inclined to drift than react sharply. With only a few trading days left in the year, positioning discipline and capital preservation continue to shape behavior across the Asia-Pacific region.

China and Hong Kong Edge Higher Despite Rising Geopolitical Rhetoric

Mainland Chinese equities posted modest gains, with the Shanghai Composite rising 0.3%, while Hong Kong’s Hang Seng Index advanced 0.3% to 25,887.33. These moves came even as Beijing announced joint military drills involving air, naval, and rocket forces around Taiwan, framing the exercises as a warning against what it described as separatist activity and external interference.

Taiwan’s equity market appeared resilient in the face of the escalation, with the benchmark index climbing 0.8%. While Taipei placed its forces on alert and issued strong political statements, investors showed little sign of panic. The market response suggests that geopolitical tensions, while serious, are being viewed as a persistent background risk rather than an immediate catalyst for broad de-risking.

Japan and Australia Slip as Liquidity Thins

In Japan, the Nikkei 225 slipped 0.2% to 50,663.90, reflecting light profit-taking rather than a shift in fundamentals. Currency moves were modest, with the yen strengthening slightly against the U.S. dollar, offering limited directional guidance for exporters.

Australia’s S&P/ASX 200 declined 0.3% to 8,732.70, underperforming regional peers. With commodities offering mixed signals and domestic catalysts scarce, the local market mirrored the broader theme of consolidation rather than conviction.

South Korea Outperforms as Selective Risk Returns

South Korea stood out as the session’s relative outperformer, with the Kospi jumping 1.9% to 4,207.36. The advance reflected renewed interest in technology and export-linked names, even as broader regional sentiment remained cautious. The move highlights how selective opportunities can still attract capital, even in holiday-thinned conditions.

Commodities and Currencies Reflect Cautious Balance

Precious metals traded in divergent fashion. Gold eased 0.4% to $4,535.50 per ounce, while silver surged 3% to $79.87, extending its rally to fresh record levels amid ongoing supply constraints. Both metals remain sharply higher for the year, underscoring their role as alternative stores of value amid geopolitical uncertainty and shifting monetary expectations.

Oil prices rebounded modestly in early Asian trading, with U.S. crude rising to $57.34 per barrel and Brent crude advancing to $60.86, after sharp declines late last week. In currency markets, the U.S. dollar softened slightly against the yen, while the euro held steady near $1.1770.

Looking ahead, Asian markets are likely to remain range-bound through year-end, with thin liquidity amplifying small moves but limiting sustained trends. Investors will be watching whether geopolitical developments around Taiwan translate into concrete economic consequences, while also positioning for early-January flows, U.S. monetary signals, and the durability of the global risk rally into 2026.