A day of stunning political drama is sending shockwaves through Asian markets, creating a dramatic and powerful divergence. In Tokyo, a prime minister’s fall has ignited a spectacular, record-setting rally.
But in Jakarta, the abrupt ousting of a respected finance minister has sent stocks and the currency into a sharp retreat.
This tale of two political earthquakes is unfolding against the backdrop of a resilient technology sector, which is taking its cues from another record-setting session on Wall Street.
The Ishiba bounce: a bet on a new beginning
The star of the session is Japan, where the benchmark Nikkei 225 has jumped 0.9 percent to cross the 44,000 threshold and hit a fresh all-time high.
This marks the second straight day of gains, a powerful rally sparked by Prime Minister Shigeru Ishiba’s announcement on Sunday that he will step down.
Instead of being spooked by the political uncertainty, investors are betting that a change at the top will usher in a new era of fiscal support for the economy.
“Investors are betting that the next leader from the ruling Liberal Democratic Party (LDP) could unleash a new wave of fiscal stimulus to bolster the economy,” wrote XTB Investing’s senior market analyst Hani Abuagla.
This sentiment was echoed by Julius Baer’s equity research analyst, Louis Chua, who said the change ultimately provides for “greater longer-term policy and political stability, and a more conducive pro-growth environment for the equities market.”
A shock in Jakarta: a minister’s dismissal roils the market
While Japan celebrates, a very different political drama is playing out in Indonesia, with a far more traditional and painful market reaction.
The Jakarta Composite Index has lost 1.25 percent after President Prabowo Subianto unexpectedly dismissed the highly-regarded finance minister, Sri Mulyani Indrawati, late on Monday.
The move has sent a chill through the market, with the Indonesian rupiah weakening 1.17 percent against the dollar, a clear sign of faltering investor confidence.
The Wall Street echo
This regional political turmoil is taking place as the technology sector continues to show remarkable strength, a clear echo of the bullish mood on Wall Street.
Overnight, the tech-heavy Nasdaq Composite closed at a record high, a move driven by a rebound in chipmaker Broadcom and the AI darling Nvidia.
That optimism has crossed the Pacific, with tech shares leading the gains on the Nikkei. The Japanese giant Advantest popped a stunning 7.62 percent, while Tokyo Electron rose 3.64 percent.
This pocket of strength in the tech sector provides a fragile floor for a market that is now being forced to navigate a complex and unpredictable political landscape, all while bracing for the next crucial inflation readings from the United States that will set the tone for the rest of the month.
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