Asian Markets Wrap | KOSPI plunges 2% | Yen weakens to 4-decade low

1 Jul 2026 , 07:51 PM

Market Briefs

China | Shanghai Composite 4,112.44 | +18.04 | +0.44%

Shanghai opened the third quarter on a positive note, extending gains from June’s final session as stronger-than-expected PMI data reinforced confidence in China’s economic momentum. The Composite PMI edged up to a six-month high of 50.6 in June, with the Manufacturing PMI rising to 50.3, beating the forecast of 50.1, supported by robust demand for high-tech exports. Technology stocks outperformed broadly, with AI-related names among the session’s standout gainers, as sentiment was supported by the resumption of US-Iran peace talks in Doha and the prospect of continued oil price softness benefiting China’s energy-import-dependent manufacturing sector.

Japan | Nikkei 225 70,474.74 | +412.64 | +0.59%

Tokyo extended its winning streak into July, rising for a third consecutive session as technology and AI-linked stocks continued to rebound following the prior week’s sharp sell-off. The Nikkei climbed as the yen weakened to a four-decade low, boosting the earnings outlook for Japan’s export-oriented industries, while investors also drew comfort from the resumption of US-Iran peace talks in Doha, with lower oil prices easing inflation concerns. Among the top performers on the session, Taiyo Yuden, Murata Manufacturing, and Screen Holdings all posted meaningful gains as the broader semiconductor equipment space recovered alongside renewed global AI optimism.

South Korea | KOSPI 8,303.41 | -173.07 | -2.04%

Seoul was broadly cautious as investors digested the continued fallout from the prior week’s historic volatility and awaited clarity from the US-Iran Doha talks before recommitting to the semiconductor-heavy index. The session continued a pattern of cautious positioning in Korean equities following the extreme two-way circuit-breaker moves of the prior week, with fund managers reluctant to rebuild aggressive chip stock positions without a firmer geopolitical anchor.

Hong Kong | Hang Seng Index (HSI) 22,811.83 | -145.66 | -0.63%

Hong Kong declined for the session as Iran’s refusal to hold direct talks with senior US envoys who had arrived in Doha clouded the peace deal outlook, even as lower-level technical talks with Qatari mediators continued. Iranian officials stated that terms of the ceasefire agreed upon two weeks ago needed to be resolved before more complicated issues such as limits on Tehran’s nuclear programme were negotiated, a position that markets interpreted as a significant step back from the MOU’s timeline. The Hang Seng’s persistent underperformance — now declining in four of the past five sessions — continues to reflect the index’s sensitivity to geopolitical risk premiums and its structural divergence from AI-driven markets in Tokyo, Seoul, and Taipei.

India | Nifty 50 24,005.85 | +140.10 | +0.58%

Indian Benchmark index opened the first session of July marginally higher, with Iran signalling it would dispatch a delegation to Doha for talks with Qatari mediators, dialling down geopolitical fears after the turbulence of the past two sessions. Consumer durables, pharmaceuticals, media, and FMCG shares led the advance, while IT names faced continued selling pressure. Eternal was the top Nifty 50 gainer at midday, rising nearly 3.76%, followed by Adani Ports, Nestle India, Asian Paints, and Mahindra and Mahindra, while Tech Mahindra and HCL Technologies were the session’s biggest laggards among index heavyweights.

 

Key News and Impact on India

1. Iran Signals Doha Delegation — Second Ceasefire Talks Begin

• Iran said it would not hold direct talks with senior US envoys who arrived in Doha, even as both sides prepared for lower-level technical talks with Qatari mediators, with Iranian officials insisting that terms of the two-week-old ceasefire needed to be settled before more complex issues including nuclear programme limits could be addressed.
• President Trump weighed ordering a return to military strikes on Iran but ultimately opted to give diplomacy more time, a decision that markets received as a modest positive — removing the immediate tail risk of renewed military escalation even as the peace process remained deeply uncertain.
• The US-Iran engagement in Doha marks the first substantive diplomatic contact since the MOU signing on June 18, and represents both sides returning to the table after a weekend of renewed military exchanges and Trump’s threats of annihilation via Truth Social.

Impact on India: The Doha talks’ resumption, even in a restricted format, is the most important near-term variable for India’s macroeconomic outlook. Each day of continued ceasefire translates into another day of reduced oil price pressure — Brent crude has fallen from over $120 at the conflict’s peak to below $72, a move that has saved India tens of thousands of crore rupees in import costs on an annualised basis. The RBI’s July policy meeting — now just weeks away — will be shaped significantly by whether the Doha talks produce a durable settlement or collapse again. A sustained ceasefire enables the RBI to cut rates with confidence that oil-driven inflation will not reverse the move. A breakdown would force the RBI to hold, regardless of domestic growth needs. The Doha session is therefore being tracked by Mint Street at least as closely as by Foggy Bottom.

 

2. China PMI Beats — Manufacturing Returns to Expansion as High-Tech Exports Surge

• The Shanghai Composite rose as stronger-than-expected PMI data reinforced optimism about China’s economic health, with the Composite PMI edging up to a six-month high of 50.6 in June from 50.5 in May, while the Manufacturing PMI rose to 50.3 from 50.0, beating forecasts of 50.1, supported by robust demand for high-tech exports that helped cushion trade disruptions linked to Middle East tensions.
• The Non-Manufacturing PMI ticked higher to 50.2 from 50.1, defying expectations of 49.9 and signalling continued stabilisation in China’s services sector, while technology stocks outperformed with AI-related names posting sharp gains.
• For June as a whole, the Shanghai Composite gained 0.63% while the Shenzhen Component surged 4.05% — a monthly performance that confirmed the resilience of China’s domestic AI and technology investment theme through a month of significant global market volatility.

Impact on India: China’s PMI beat is a mixed signal for India. On one hand, a recovering Chinese manufacturing sector increases global demand for commodities, raw materials, and industrial components — a modest positive for Indian exporters of chemicals, steel intermediates, and specialty products that supply Chinese manufacturers. On the other hand, China’s high-tech export surge — driven by AI-related electronics, semiconductors, and advanced manufacturing goods — directly competes with India’s own export ambitions in electronics and technology hardware. The divergence between China’s manufacturing PMI at 50.3 (expansion) and India’s own manufacturing momentum will be a key input for the Ministry of Commerce as it calibrates the pace of the Production Linked Incentive scheme targets for electronics and semiconductor assembly over the second half of 2026.

 

3. Nikkei Extends Recovery — Yen at Four-Decade Low Amplifies Export Optimism

• The Nikkei climbed as the yen weakened to its lowest level in four decades, boosting the profit outlook for Japan’s export-oriented industries, with technology and AI-related stocks rebounding while investors also monitored the resumption of US-Iran peace talks in Doha.
• The Bank of Japan’s Summary of Opinions had flagged continued rate hike intentions at its June meeting, but the yen’s continued slide to multi-decade lows suggests markets are not yet convinced the BoJ will move aggressively enough to reverse the currency’s structural weakness.
• The Nikkei and Topix posted gains for a third consecutive month in June, rising 5.3% and 1.0% respectively, confirming Japan’s equity market has digested the May-June technology sell-off without structural damage to its longer-term uptrend.

Impact on India: The yen at a four-decade low creates a specific and immediate competitive pressure for India’s automobile and electronics export sectors. Japanese automakers — Toyota, Honda, Suzuki — whose India-manufactured products compete with their own imported models, gain an internal pricing advantage when the yen weakens relative to the rupee, since their Japan-sourced components become cheaper in rupee terms. For India’s two-wheeler and passenger vehicle manufacturers competing with Japanese brands in Southeast Asian export markets, a structurally weak yen is a headwind that compounds the existing pressure from Chinese electric vehicle manufacturers. The RBI monitors yen-rupee dynamics as part of its broad exchange rate management framework, and a sustained yen at four-decade lows will be a factor in how aggressively India can reduce its own interest rate differential without triggering rupee weakness through comparative carry trade dynamics.

 

4. SpaceX Joins Nasdaq-100 From July 7 — New Quarter Opens With Index Reshaping

• SpaceX’s confirmed addition to the Nasdaq-100 from July 7, announced after the June 27 market close, takes effect in the first week of the new quarter, with index-tracking funds estimated to represent approximately $500 billion in assets under management required to purchase SpaceX shares before the market opens on July 7.
• SpaceX’s AI segment xAI has signed agreements with Anthropic, Alphabet, and AI startup Reflection AI, totalling $27.8 billion in annual revenue, putting the company on track to surpass last year’s revenue performance and reinforcing the commercial logic of its Nasdaq-100 inclusion.
• The company’s stock had already fallen below its IPO price of $150 in the weeks after listing before recovering, reflecting the volatility typical of high-profile new additions — historical data compiled by Truist shows that more than half of the 30 largest IPOs over the past 15 years were underwater by the end of their first week, with 17 of 30 in the red within six months.

Impact on India: SpaceX’s Nasdaq-100 entry from July 7 will reshape the technology index that Indian IT sector stocks are most frequently benchmarked against by global fund managers. As passive funds tracking the Nasdaq-100 add SpaceX exposure, they will need to reduce weightings in existing components — a mechanical process that could create modest selling pressure in Nasdaq-100 members including Microsoft, Apple, Nvidia, and Meta Platforms, all of which are significant clients of Indian IT services firms. The SpaceX addition also elevates space technology and AI compute satellites as formal components of the global technology benchmark, a development that will accelerate investor interest in Indian space technology companies — ISRO’s commercial arm NewSpace India, Skyroot Aerospace, Agnikul Cosmos — as the space sector is increasingly seen as a mainstream technology investment category rather than a speculative niche.

 

5. Hang Seng Diverges — IPO Lockup Wave and Iran Risk Keep Hong Kong Under Pressure

• Hong Kong’s persistent underperformance relative to other Asian markets continued on July 1, with the Hang Seng declining even as Tokyo gained and Shanghai edged higher, reflecting the dual pressure of geopolitical risk sensitivity and the upcoming HK$255 billion IPO lockup expiry wave in July.
• The index has now diverged meaningfully from the year-to-date performance of peer Asian markets — the KOSPI is up over 100% year-to-date despite its recent circuit-breaker volatility, the Nikkei is up significantly from its early-year lows, while the Hang Seng has lagged as a persistent discount to its intrinsic value.
• Technology platform stocks including Alibaba, Tencent, Meituan, and Xiaomi have consistently underperformed global AI hardware names in 2026, reflecting investor preference for infrastructure-layer AI plays — chipmakers, memory producers, equipment manufacturers — over application-layer consumer technology platforms.

Impact on India: Hong Kong’s structural underperformance relative to other Asian markets is an important data point for Indian capital markets positioning. Global institutional investors who are underweight Hong Kong relative to their MSCI EM benchmark are typically overweight India, South Korea, and Taiwan as alternatives — a structural flow dynamic that has supported Indian equity inflows through 2026 even during periods of FII selling. The Hang Seng’s continued weakness therefore has a direct positive correlation with India’s relative attractiveness in the MSCI EM framework: the weaker Hong Kong looks on a fundamentals basis, the more compelling the case for India as the preferred large-market alternative within Asia’s emerging market universe. For Indian market participants, monitoring the Hang Seng’s performance is not just an exercise in geopolitical awareness — it is a leading indicator of how aggressively global EM fund managers are likely to rebalance toward India in the weeks ahead.