Asia stocks rise as KOSPI rebounds; Bank of Japan keeps rates steady

Asian equities climbed on Friday, led by a sharp rebound in South Korea's KOSPI index, as investor sentiment improved following a strong session on Wall Street. The Bank of Japan also concluded its policy meeting, opting to hold interest rates steady, a move widely anticipated by markets.

KOSPI's record recovery

South Korea's benchmark KOSPI index posted its largest daily gain on record, according to multiple reports, bouncing back from a brutal selloff that had been driven by a rout in chip stocks. The rebound underscores the volatile, 'bipolar' nature of the market, as described by financial commentators, with investors rapidly piling back into artificial intelligence-related equities.

The index soared 18% in a single session, as per Financial Times, reflecting a dramatic reversal in risk appetite. The surge came after a period of intense turbulence, where concerns over AI valuations and global tech demand had triggered a meltdown.

Bank of Japan holds rates

Meanwhile, the Bank of Japan kept its policy rate unchanged, maintaining its current stance as it continues to assess economic conditions. The decision aligns with market expectations, though investors remain attentive to any signals regarding future tightening.

Japan's central bank has been cautious in its approach, balancing domestic inflation trends against global uncertainties. The hold provides some relief to regional markets, as a rate hike could have strengthened the yen and weighed on exporter stocks.

Wall Street tailwinds

Regional markets drew support from a robust performance on Wall Street overnight, where technology shares led gains. The positive momentum helped offset lingering concerns about trade tensions and geopolitical risks.

Investors are closely watching the AI sector, which has driven much of the recent market swings. The rapid repricing of chip stocks, from a sharp decline to a record rally, highlights the heightened sensitivity of markets to AI-related news flow.

Market outlook

Analysts note that South Korea's market remains susceptible to sharp swings, given its heavy weighting in semiconductors and tech. The recent volatility has prompted authorities to explore measures to tame wild fluctuations, though the record rebound suggests investor confidence is returning.

Across the region, trading volumes were elevated, with most major indices in positive territory. Japan's Nikkei and Australia's ASX also advanced, tracking the broader risk-on mood.

Looking ahead, market participants will focus on upcoming economic data and corporate earnings from major tech firms to gauge whether the AI-driven rally can sustain its momentum. The BOJ's next policy meeting will also be scrutinised for any shift in its communication.