Asia stocks hold sharp gains; S. Korea hits new peak, China factory output misses

Updates at 04:35 GMT with latest price moves, analyst comments on Chinese data

Investing.com-- Most Asian share markets were steady on Monday after strong gains last week, with South Korea touching fresh record highs and China holding near decade peaks, even as factory output and retail sales data undershot expectations.

Blue-chip Chinese stocks led gains amid choppy trades, as tech stocks extended their rally, tracking Wall Street’s renewed optimism around AI.

All three benchmark U.S. stock indexes reached record highs last week, buoyed by expectations that the Federal Reserve would reduce interest rates this week.

As of 03:50 GMT, U.S. stock index futures traded largely unchanged.

China factory output misses estimates; US-China Madrid talks in focus

China’s industrial production rose at its weakest pace in a year in August -- slowing to 5.2% growth year-over-year, from July’s 5.7% and missing forecasts of the same rate. 

Retail sales increased 3.4% year-on-year, below July’s 3.7% and analysts’ expectations for 3.8%. 

The data suggested that momentum in the world’s second-largest economy remained fragile despite earlier signs of stabilisation.

"Another month of disappointing Chinese data across the board may be creating a sense of deja vu, repeating last year’s slowdown around this same time," ING analysts said in a note.

"We expect the recent softening of momentum to strengthen the case for unveiling new stimulus ahead," they added.

Still, Chinese stocks extended their rally, with gains in technology and consumer shares, boosted by upbeat AI sentiment in the U.S.

The Shanghai Composite index inched up 0.2%, hovering just below 10-year highs, while the Shanghai Shenzhen CSI 300 jumped nearly 1%, remaining near an over-three-year high.

Hong Kong’s Hang Seng Index rose 0.3%, staying close to a four-year peak.

Meanwhile, China and the U.S. opened high-level trade talks in Madrid on Sunday, covering tariffs, export controls and digital economy disputes. The discussions followed a 90-day truce agreed in July.

A day before the summit, China’s commerce ministry said it had begun an anti-discrimination investigation into U.S. trade policy over chips, and a separate investigation into dumping.

The probes boosted optimism toward domestic Chinese chipmakers, as investors bet local firms could gain market share if tariffs or restrictions curb U.S. chip sales into China

Fed decision awaited; S.Korea’s KOSPI hits record high 

The region’s outlook would likely be shaped by U.S. economic data and the Federal Reserve’s rate decision later this week. 

Signs of a cooling U.S. labour market and still-firm inflation have left investors confident the Fed will cut rates by at least 25 basis points, a move that could boost risk appetite globally.

South Korea’s KOSPI rose 0.6% to a fresh record peak of 3,420.23 points on Monday, led by semiconductor giants SK Hynix Inc (KS:000660) and Samsung Electronics (KS:005930). 

Investors also welcomed government signals of market reforms, including the postponement of proposed capital gains tax changes. 

Japan’s markets were shut on Monday for a public holiday, but remain near record highs. 

The Nikkei 225 has been lifted by technology and industrial stocks, mirroring gains in U.S. tech shares driven by AI enthusiasm. 

Elsewhere, Australia’s S&P/ASX 200 edged down 0.2%, while Singapore’s Straits Times Index traded flat.

India’s Nifty 50 opened largely unchanged on Monday.