Nikkei 225 Hits All-Time High, Shanghai Stock Market Reaches Highest Level in a Decade

Japan: Weaker Yen and Anticipation of Inflows from Foreign Investors

Shanghai: Market Reflects Government Support and Optimism for AI

On the 18th (local time), the Japanese and Chinese stock markets both reached record highs.

On this day, the Nikkei 225 on the Tokyo Stock Exchange closed at 43,714.31 points, up 0.77%, setting another all-time high. The broader TOPIX rose 0.43% to 3,120.96. Both indices marked record highs for the second consecutive trading day.

Optimism about economic growth rose after Japan's Q2 GDP was reported over the weekend to have increased 1.3% annually. Additionally, as the yen weakened 0.2% against the US Dollar, forecasts of continued dollar strength led to surges in the stock prices of export companies such as auto manufacturers, driving the indices higher.

Seiichi Suzuki, Chief Equity Analyst at Tokai Tokyo Intelligence Research Institute, said, "There are expectations that foreign investors will continue to purchase Japanese stocks."

Of over 1,600 stocks traded on the Tokyo Stock Exchange, 69% rose and 27% fell.

Stock markets in China and Taiwan also continued their upward momentum.

On the same day, the Shanghai Composite Index rose 0.9% to close at 3,728 points. Taiwan's TAIEX increased by 0.6%. In contrast, Hong Kong’s Hang Seng Index fell by 0.3%.

The Shanghai Composite Index reached its highest level since August 2015. It has risen over 20% since the selling pressure in April following the announcement of reciprocal tariffs by US President Trump.

The market's recovery was also reflected in a surge in trading volume. According to Bloomberg, trading on mainland Chinese exchanges exceeded 2.7 trillion yuan (about ₩521 trillion) that day, the second highest level ever recorded since October 8 last year.

Margin loans for stock purchases also surged. The margin loan volume for stock buying last week hit its highest level since 2015.

According to Bloomberg, this rally indicates a growing optimism among Chinese investors for small-cap stocks, moving away from bonds. In 2015, a market crash prompted the Chinese government to inject emergency funds to support stock prices.

Before the bubble burst, the Shanghai Composite Index peaked at 5,166. The record high was set in October 2007.

The Shanghai Index has climbed 11% this year, outperforming the CSI 300, which is up about 8%.

Policy support from the Chinese government has also encouraged investors to turn to domestic stocks. China announced it will strengthen tax supervision on profits from overseas stock trades and subsidize interest payments on qualified consumer loans.

Chinese fund managers hope that from optimism about AI to growth-promoting policies, the current rally has enough backing to withstand the test of time.

Wang Huan, a fund manager at Shanghai Zige Investment Management, cited ample liquidity and government measures to curb price wars as positive signs and said, "I am confident this rally will continue."

Guest reporter Jung-A Kim kja@hankyung.com