Asian Stocks Mixed as South Korea Slides on Profit-Taking, Japan and China Gain on Strong Factory Data

Asian stock markets traded mixed on Wednesday, with South Korean equities leading regional losses as investors locked in profits after an exceptional second-quarter rally. Meanwhile, stronger manufacturing data from Japan and China supported gains in those markets, highlighting continued resilience in Asia’s industrial sector.

The decline in South Korea followed one of the region’s strongest quarterly performances. The KOSPI surged nearly 65% during the April-to-June period, while Japan’s Nikkei 225 advanced more than 36%. The broader MSCI Asia ex-Japan Index climbed roughly 21%, driven largely by strong demand for artificial intelligence and semiconductor-related stocks.

Despite Wall Street ending the second quarter at record highs, investor sentiment remained cautious. U.S. stock futures edged lower, with both S&P 500 Futures and Nasdaq 100 Futures slipping 0.3% as traders awaited fresh economic catalysts. Markets also continued monitoring geopolitical developments, with U.S. officials saying negotiations with Iran were progressing after constructive discussions with Qatari leaders, although recent tensions near the Strait of Hormuz briefly interrupted the 60-day diplomatic process.

Chinese stocks outperformed after official data showed the country’s manufacturing sector remained in expansion territory during June. A private RatingDog survey also indicated continued factory growth, though at a slightly slower pace, as robust exports helped offset weaker domestic demand. The Shanghai Composite gained 0.9%, while the CSI 300 added 0.3%. Hong Kong markets remained closed for a public holiday.

Japanese equities also posted gains following encouraging economic reports. The Bank of Japan’s Tankan survey showed improved sentiment among large manufacturers during the second quarter, while the final au Jibun Bank manufacturing PMI remained firmly in expansion territory despite a slight decline from the previous month. The Nikkei 225 rose 0.6%, while the TOPIX traded largely flat.

Improving manufacturing conditions across Asia, combined with easing concerns over shipping disruptions through the Strait of Hormuz, helped support broader market confidence. Reflecting this optimism, Bank of America raised its year-end targets for both the Nikkei 225 and TOPIX, citing stronger-than-expected AI demand and a greater likelihood that the critical oil shipping route will remain open.

Elsewhere in Southeast Asia, Thailand’s manufacturing PMI strengthened, signaling improving industrial activity. However, Thailand’s SET Index fell 0.4% as investors remained cautious ahead of key U.S. economic releases and ongoing domestic political uncertainty.

South Korea’s KOSPI dropped 1.7%, marking the steepest decline among major Asian markets. The selloff came despite robust trade figures showing June exports jumping 70.9% year-over-year, imports rising 30.1%, and the country’s trade surplus widening to $36.15 billion. Investors nevertheless chose to secure gains after the market’s sharp second-quarter rally.

Indonesia’s Jakarta Composite Index climbed more than 1% after inflation accelerated to 3.2% in June. Manufacturing activity across Southeast Asia also showed resilience, with Thailand’s PMI rising to 53.6, Malaysia’s improving to 50.7, and the Philippines posting a modest increase, although Indonesia’s manufacturing PMI remained in contraction territory.

Australia’s S&P/ASX 200 fell 0.6% after data revealed building approvals unexpectedly declined 1.1% in May, weighing on investor sentiment.

Looking ahead, investors are focused on upcoming Federal Reserve signals, the U.S. nonfarm payrolls report, the start of the U.S. corporate earnings season, and developments in the Middle East, all of which are expected to influence global market sentiment and Asian stocks during the second half of the year.