AI Optimism Lifts Stocks Despite Middle East Tensions – Asia Market Wrap

Stocks advanced on the final trading day of the week as renewed optimism over artificial intelligence-driven demand outweighed the latest flare-up in Middle East tensions. Comments from Japanese Finance Minister Satsuki Katayama also boosted the yen.

MSCI’s Asia Pacific equities index rose 1.7%, trimming its weekly decline to less than 1%. Hong Kong’s Hang Seng Index climbed 1.9%, putting it on track for its strongest week in more than a year. South Korea’s Kospi, a key barometer for AI-related investments, jumped 5%, led by SK Hynix following its $26.5 billion American depositary share offering.

Despite the upbeat mood in Asia, caution lingered, with futures for both US and European equities edging lower.

Elsewhere, Japan’s longer-dated government bonds advanced after Katayama said the government wants to encourage pension funds to increase investments in domestic financial assets. The yen strengthened 0.5% to around 161.65 per dollar, while a gauge of the US dollar headed for a second consecutive weekly decline.

Treasuries gained for a second day, with the benchmark 10-year yield slipping one basis point to 4.54%. Oil steadied near $76.70 a barrel as traders judged the US-Iran conflict was unlikely to escalate into a broader disruption to global energy supplies.

With Middle East tensions appearing contained, investors rotated back into technology stocks, encouraged by confidence that the AI investment boom remains intact. Following this week’s pullback, many viewed the weakness as a buying opportunity ahead of an earnings season expected to reinforce the outlook for AI-driven growth.

In Asia, SK Hynix’s ADR offering is expected to help finance increased investment to meet rising demand for AI computing equipment. The company and Samsung Electronics are preparing to expand investment in South Korea as part of a government-backed initiative valued at $880 billion.

SK Hynix’s ADRs are scheduled to begin trading on Friday on the Nasdaq Global Select Market under the ticker SKHYV, before changing to SKHY when regular trading begins on July 13.

Global equities experienced a volatile week as chip stocks swung between gains and losses. Friday’s advance helped the MSCI All Country World Index erase its weekly decline, leaving it on track for a modest gain of 0.1%.