Asia-Pacific stock markets traded in mixed directions on Wednesday, following Wall Street’s decline, as investors remained cautious ahead of the U.S. Federal Reserve’s two-day policy meeting. The Fed is widely expected to announce its first interest rate cut since December 2024.

Japan and South Korea Edge Lower

In Japan, the Nikkei 225 hovered near the flatline, while the Topix slipped 0.4%. Government data showed that exports fell 0.1% year-on-year in August, a smaller drop than the 1.9% decline forecasted by Reuters’ economists, and an improvement from July’s 2.6% fall. Exports have been under pressure due to U.S. tariffs and the slowdown following early front-loaded shipments earlier this year.

South Korea’s Kospi lost 0.75%, while the Kosdaq small-cap index retreated 0.38%.

Hong Kong and Mainland China Advance

In contrast, Hong Kong’s Hang Seng Index rose 1.35%, while the Hang Seng Tech Index surged 3.43%. Shares of Baidu jumped as much as 14% after the company announced the successful completion of a 4.4 billion yuan ($618 million) offshore bond issuance maturing in 2029.

Earlier this week, Baidu also signed a partnership deal with state-owned China Merchants Group to collaborate on artificial intelligence technologies, further fueling optimism. On the mainland, the CSI 300 climbed 0.6%.

India Rises, Singapore Weakens

India’s benchmarks saw modest gains, with the Nifty 50 up 0.33% at the open and the Sensex adding 0.14%.

Meanwhile, Singapore’s non-oil domestic exports plunged 11.3% in August compared with a year ago, far worse than the 1% increase expected by economists. The sharp drop was driven by lower demand for specialized machinery, food preparations, and petrochemicals. This marks the second consecutive monthly decline, following July’s revised 4.7% fall.

As one of the world’s most open economies, Singapore’s export data is often seen as a barometer of global trade health, making this steep contraction particularly concerning.

Wall Street Pulls Back Ahead of Fed Outcome

Overnight in the U.S., investors took profits ahead of the Fed’s decision, sending stocks lower:

The S&P 500 slipped 0.13% to 6,606.76 after touching a fresh intraday record.

The Nasdaq Composite edged down 0.07% to 22,333.96.

The Dow Jones Industrial Average lost 125.55 points, or 0.27%, closing at 45,757.90.

Analysts say the Fed’s decision will be the key driver for global markets in the near term, potentially influencing both equity flows and currency dynamics across Asia.

FAQ – Key Questions on the Fed and Asian Markets

1. Why does the Fed’s rate decision impact Asian stock markets?
The Fed’s interest rates directly influence global capital flows. A rate cut typically weakens the U.S. dollar, making Asian markets more attractive to investors. Conversely, higher U.S. rates tend to pull capital back into American assets, pressuring Asian equities.

2. Which markets may benefit most from a Fed rate cut?
Markets that rely heavily on foreign capital, such as Hong Kong, China, and India, are likely to benefit first. Sectors like technology and consumer stocks often see stronger momentum during periods of easier monetary policy.

3. What does Singapore’s export slump signal about global demand?
Singapore’s economy is highly dependent on trade, so its export performance often reflects the state of global demand. The sharp decline in August highlights weakening appetite for industrial goods, machinery, and chemicals, raising concerns about global economic momentum.

4. Why are Japan’s exports struggling despite a smaller-than-expected drop?
Japan’s exports have been hit by U.S. tariffs and a slowdown after earlier front-loading of shipments in the first half of the year. This makes subsequent months weaker as demand normalizes.

5. What should investors watch in the short term?

The Fed’s upcoming rate cut decision.

Export trends in key Asian economies.

Performance of Chinese and Hong Kong tech stocks.

U.S. economic indicators such as inflation (CPI) and jobs data to gauge future Fed actions.