Asian bulls ignore hawkish Fed signal: Nikkei and KOSPI storm to historic highs
While U.S. indices experienced one of their worst days since the Fed chair change in 1994, Asian markets are showing remarkable resilience. Japan's Nikkei 225 and South Korea's KOSPI have hit all-time highs, seemingly unfazed by Kevin Warsh's hawkish rhetoric.
The Fed's decision to keep the base rate in the 3.5–3.75% range was expected, but that wasn't the main surprise. The new dot plot showed a sharp tightening of forecasts: the median rate forecast for the end of the year surged to 3.8%, up from March's 3.4%. This means the regulator is effectively preparing for an additional hike, and U.S. markets reacted immediately—all 11 sectors of the S&P 500 closed in the red.
Asia: Playing Its Own Game
On Thursday, Asian markets opened on a positive note, ignoring the decline on Wall Street. Japan's Nikkei 225 surpassed the 71,000-point mark for the first time in history, while the Topix index also showed solid gains. In South Korea, the KOSPI updated its all-time high, fueled by a strong surge in SK Hynix shares (+3.45%) following news of supplying trial samples of the new HBM4E AI chip to key clients, including Nvidia. Samsung Electronics shares rose by 1.23%.
This divergence in dynamics between Asia and the West is no coincidence. Asian markets are currently driven by internal growth drivers, primarily the boom in the semiconductor and artificial intelligence sectors. Demand for products from South Korean and Japanese tech giants remains extremely high, outweighing concerns about global monetary policy.
Hawkish Signal and Pressure on the Crypto Market
The rise in the yield on 2-year U.S. Treasury bonds by 16 basis points—to 4.22%—is a clear signal that the market is pricing in tightening. Kevin Warsh, unlike his predecessors, refrains from clear forecasts, but 9 out of 18 Fed representatives already expect at least one rate hike by the end of the year.
For the cryptocurrency market, this scenario poses a serious challenge. Bitcoin and other risk assets are extremely sensitive to changes in global liquidity. The Fed's policy tightening creates pressure on all high-risk asset classes, and although Asia is currently showing independence, this divergence cannot last forever.
My view: The current gap between Asian and U.S. markets is a temporary phenomenon, fueled by unique sectoral factors. Once the euphoria around AI chips begins to fade and the Fed moves to real action, the correction in Asia could be as sharp as the rise. Investors should closely monitor the Fed's dot plot—it is the main indicator of sentiment for the coming months.