Asia Pacific indices

The region that opens the day 

The Asia Pacific cash sessions run while Europe and the Americas are closed, which gives the region a role no other bloc has: it is where news released after the American close is first expressed in equity prices. A development in the American evening reaches Tokyo, Sydney and Hong Kong hours before any European market opens, and the direction the region takes is part of what European and American contracts are quoted against when they reopen.

The contracts the ledger carries in the region are Japan 225, Hong Kong 50, China A50, Australia 200, Singapore 30, Taiwan Index and Korea 200. They cover markets with different currencies, different currency regimes, different degrees of openness to foreign capital and very different sector concentrations, so treating them as one regional block is as misleading here as it is in Europe.

Japan 225, price weighted and yen sensitive 

The Japanese benchmark referenced by the Japan 225 contract is price weighted, in the same tradition as the oldest American index. Influence follows share price rather than company size, so a handful of high priced constituents carry a disproportionate share of the movement, and a share split at one of them changes the arithmetic of the whole index. A capitalisation weighted alternative for the same market exists and is widely followed, and the two can diverge for extended periods.

The relationship a reader will meet most often is with the yen. The index is heavily weighted toward exporters and toward companies earning substantial foreign revenue, so a weaker yen raises the domestic currency value of those earnings when they are translated, which has historically supported the index, while a stronger yen has done the reverse. The link runs through translation and competitiveness rather than through any rule, it has been unusually strong in some periods and absent in others, and it does not hold when the news moving the yen is also a shock to global demand.

Japanese monetary policy reaches this contract through the same channel and through domestic bank equity, which is why decisions from the Japanese central bank register on the index rather than only on the currency.

Hong Kong 50 and China A50, two windows on one economy 

These two contracts reference the same underlying economy through different share classes, different regulatory regimes and different investor bases, and the distinction is the most important single fact about the pair.

Hong Kong 50 references the large capitalisation benchmark of the Hong Kong exchange. Its constituent list mixes Hong Kong companies with mainland Chinese companies that have chosen to list there, and it is dominated by financials, property, internet platforms and telecommunications. It is freely accessible to international investors, is denominated in a currency held inside a band against the United States dollar, and therefore imports American interest rate conditions through that currency regime while its earnings are driven by mainland activity. That combination, American rates and Chinese growth reaching one index from opposite directions, is what makes it behave unlike any other contract in the class.

China A50 references a benchmark of the largest mainland listed shares, the domestically quoted class that is subject to capital controls and to restricted foreign access. Its constituents lean toward domestic banks, insurers, spirits and consumer companies, and the market it measures is far more retail driven than the institutionally dominated markets elsewhere in the region. Mainland policy announcements, domestic credit measures and administrative interventions reach it directly, and it can move independently of the Hong Kong listed complex on the same day for exactly that reason.

Australia 200, banks and mining in one list 

The Australian benchmark is dominated by two groups: the large domestic banks and the global mining houses. The first ties the index to domestic credit conditions, to the housing market and to the Australian central bank. The second ties it to Chinese construction and industrial demand through iron ore and coal, so a Chinese activity release can move an Australian index more than an Australian one does.

The Australian dollar responds to the same commodity channel, which means an unhedged position in this index and a position in the currency frequently express overlapping exposures rather than independent ones. The overlap is a property of the underlying economy rather than a fixed relationship, and its strength varies.

Taiwan Index and Korea 200, the semiconductor cycle 

These two markets are the most concentrated in the class and the most directly exposed to a single global industry. Both benchmarks are dominated by semiconductor manufacture and electronics assembly, and in the Taiwanese case a single company carries a share of the index large enough that its results move the whole contract on their own.

Both indices are therefore read as much as instruments on the semiconductor cycle as on their national economies. Global technology capital expenditure, memory and logic pricing, export orders and trade policy reach them first, and they frequently lead the technology heavy indices of other regions rather than following them, because the manufacturing sits here and the demand is reported later elsewhere. The Korean market adds a currency layer: the won is a floating, relatively volatile currency and foreign investor flows in and out of it move the index and the currency together.

Singapore 30, the regional financial proxy 

The Singaporean benchmark is a short list dominated by banks, property trusts and industrial conglomerates whose businesses run across Southeast Asia. It is best understood as a proxy for regional financial conditions rather than for a domestic economy, since a substantial share of the earnings behind it is generated outside Singapore. The Singaporean monetary authority manages policy through the exchange rate rather than through a policy interest rate, which is an unusual regime and one that makes the currency the instrument through which policy reaches the index.

The split session, and why it matters to a contract 

Most Asian cash sessions are divided into a morning and an afternoon by a midday break, a convention Europe and the Americas abandoned long ago. Tokyo trades from nine in the morning until half past eleven and again from half past twelve until three in the afternoon local time. Hong Kong trades from half past nine until noon and again from one in the afternoon until four. Taipei and Seoul run continuously, and Sydney runs from ten in the morning until four in the afternoon local time.

During a lunch break no constituent price is being set, so the index level is static while the derivative continues to be quoted from the futures market. News released into the break is therefore expressed in the CFD before it is expressed in the index, and the cash index catches up in a single step at the afternoon reopen. The same mechanism, on a larger scale, produces the overnight gap: the region's cash markets are shut through the entire European and American day, so a full day of global news arrives at the Asian open at once.

For a reader in the Gulf, the Asian cash sessions run through the local early morning and the local morning, and most of the region has closed by the time the Gulf working day is well advanced. The European open follows in the local afternoon and the American open in the local evening.