Asian stock markets moved unevenly on Wednesday as profit-taking in South Korea outweighed gains driven by firm manufacturing data in Japan and China. The KOSPI, which posted one of the region's most powerful quarterly increases, slid as investors booked profits, while Tokyo and mainland Chinese benchmarks rose after upbeat PMI readings signalled continued expansion in factory activity across North Asia.
The pullback in Seoul followed a dramatic second-quarter advance across parts of the region. Investors had piled into artificial intelligence and semiconductor names through the quarter, sending the KOSPI up nearly 65% over the three months to June and lifting Japan’s Nikkei 225 by more than 36%. The broader MSCI Asia ex-Japan Index recorded a roughly 21% gain over the same period.
Despite the heady gains earlier in the quarter, regional sentiment was measured on Wednesday as Wall Street closed out a strong second quarter at record highs and U.S. futures edged lower ahead of fresh catalysts. S&P 500 Futures and Nasdaq 100 Futures each fell about 0.3% on Wednesday as markets awaited more direction from upcoming data and corporate results.
Alongside market moves, U.S. officials said talks with Iran had continued to show progress following constructive discussions with Qatari leaders, even as recent clashes near the Strait of Hormuz briefly interrupted a 60-day negotiating timeline. Such developments have been watched closely by investors because of their potential to influence shipping and energy market dynamics.
Manufacturing strength underpins gains in China and Japan
Chinese equities outperformed peers after official data showed manufacturing activity remained in expansion territory in June. A private RatingDog survey also pointed to ongoing factory expansion, though it eased marginally, suggesting exports continued to support manufacturing momentum. On the mainland, the Shanghai Shenzhen CSI 300 climbed 0.3% and the Shanghai Composite rose 0.9%. Hong Kong’s markets were closed for a public holiday.
Tokyo's market advanced after a streak of positive economic releases boosted confidence in the corporate outlook. The Bank of Japan’s Tankan survey showed an improvement in large manufacturers’ sentiment in the second quarter. The final au Jibun Bank manufacturing PMI slipped slightly but stayed firmly in expansion and above May’s reading. The Nikkei 225 increased 0.6%, while the TOPIX was little changed.
Broader risk appetite was also supported by easing concerns that disruptions to shipping through the Strait of Hormuz would persist. Bank of America raised its year-end targets for the Nikkei 225 and TOPIX, citing stronger-than-expected demand for AI-related technology and an increased likelihood that the key oil shipping route remains open.
Manufacturing activity strengthened in other parts of the region as well. Thailand’s manufacturing PMI rose, reinforcing signs of improving industrial momentum, though the SET Index slipped 0.4% as investors remained cautious ahead of key U.S. economic releases and amid lingering domestic political uncertainty.
Korea’s profit-taking contrasts with export strength
South Korea led regional losses, with the KOSPI dropping 1.7% — the steepest decline in the region on Wednesday — despite trade figures that underscored the resilience of the country’s export sector. June exports jumped 70.9% year-on-year, imports increased 30.1%, and the trade surplus widened to $36.15 billion. Market participants, however, chose to lock in gains after the benchmark’s substantial rally over the quarter.
Elsewhere in Southeast Asia, Indonesia’s Jakarta Stock Exchange Composite Index rose more than 1% after data showed inflation accelerated to 3.2% in June. Regional manufacturing readings were mixed but broadly resilient: Thailand’s PMI rose to 53.6, Malaysia’s improved to 50.7, the Philippines edged up, while Indonesia’s manufacturing PMI remained in contraction.
In Australia, an unexpected 1.1% decline in building approvals for May dulled sentiment toward the S&P/ASX 200, which fell 0.6% on the day.
Looking ahead, investors were focused on several near-term factors that could steer market direction into the second half of the year: signals from the Federal Reserve, Thursday’s U.S. payrolls report, the start of the U.S. earnings season, and further developments in the Middle East. Each of these items is expected to influence risk appetite across global equity markets.
Summary: South Korea’s KOSPI retreated as traders took profits after an exceptional quarterly rally, while positive manufacturing data in Japan and China supported gains in Tokyo and on mainland exchanges. Markets overall remained cautious as participants awaited key U.S. data and monitored geopolitical and shipping developments.