Asian markets represent some of the largest and most liquid stock exchanges in the world. For US-based traders, understanding these markets can provide valuable insights into global economic trends and create opportunities to trade before American markets open. This guide covers everything you need to know about trading the major Asian indices.
Why Asian Markets Matter to US Traders
Asian markets open while US traders are sleeping, but their movements often set the tone for the next trading day. When Asian markets have a strong session, US futures frequently gap up at the open. Conversely, selloffs in Asia can lead to weak openings in New York.
Key insight: Asian markets trade approximately 12-16 hours before US markets open. Monitoring overnight action in Asia helps you anticipate how US markets might behave at the open.
The Three Major Asian Indices
1. Nikkei 225 (Japan)
The Nikkei 225 is Japan's premier stock index, tracking 225 large companies listed on the Tokyo Stock Exchange. It includes global giants like Toyota, Sony, and SoftBank. Japan has the world's third-largest economy, making the Nikkei a critical barometer of Asian economic health.
- Trading hours: 9:00 AM - 3:00 PM JST (7:00 PM - 1:00 AM EST)
- ETF to trade: EWJ (iShares MSCI Japan ETF)
- Futures: NKD (Nikkei futures on CME)
2. Hang Seng Index (Hong Kong)
The Hang Seng Index tracks the 50 largest companies on the Hong Kong Stock Exchange. It serves as a gateway for international investors to access Chinese companies and is heavily influenced by both Chinese economic policy and global sentiment toward China.
- Trading hours: 9:30 AM - 4:00 PM HKT (9:30 PM - 4:00 AM EST)
- ETF to trade: EWH (iShares MSCI Hong Kong ETF)
- Key sectors: Finance, technology, real estate
3. Shanghai Composite (China)
The Shanghai Composite Index tracks all stocks listed on the Shanghai Stock Exchange, one of China's two main exchanges. It provides direct exposure to mainland Chinese companies and is more sensitive to domestic Chinese economic conditions than the Hang Seng.
- Trading hours: 9:30 AM - 3:00 PM CST (8:30 PM - 2:00 AM EST)
- ETF to trade: FXI (iShares China Large-Cap ETF)
- Note: A-shares have trading restrictions for foreign investors
Time Zone Quick Reference
When it is 9:00 PM EST in New York:
- Tokyo: 11:00 AM (next day) - Market open
- Hong Kong: 10:00 AM (next day) - Market open
- Shanghai: 10:00 AM (next day) - Market open
How Asian Markets Correlate with US Markets
Understanding correlations helps you interpret overnight moves. Here are the key relationships:
- Nikkei and S&P 500: Moderate positive correlation. Japan's export-driven economy benefits when global growth is strong.
- Hang Seng and US Tech: Higher correlation due to large tech component. Moves in BABA and Tencent often mirror US tech sentiment.
- Shanghai and US Markets: Lower correlation due to capital controls and domestic focus. China often moves independently.
Trading Strategies for Asian Markets
Strategy 1: Gap Trading
When Asian markets make significant moves overnight, US markets often gap in the same direction. Monitor Asian indices before the US open to position yourself for potential gap trades.
Strategy 2: Carry Trade Correlations
The Japanese yen carry trade affects the Nikkei significantly. When the yen weakens, Japanese exporters benefit and the Nikkei often rises. Watch USD/JPY for clues about Nikkei direction.
Strategy 3: China Policy Events
Chinese markets are heavily influenced by government policy. Major announcements from the People's Bank of China or economic planning meetings can cause significant volatility. These events often occur during Asian trading hours.
Pro tip: Set alerts for when Asian indices move more than 1.5% in either direction. Large overnight moves often lead to volatile US opens.
Key Economic Events to Watch
Several economic releases specifically impact Asian markets:
- Bank of Japan meetings: Interest rate decisions and monetary policy statements
- China PMI data: Released on the first of each month
- Japan Tankan Survey: Quarterly business sentiment indicator
- China GDP: Released quarterly, major market mover
- Hong Kong GDP and trade data: Indicators of regional economic health
Risks of Trading Asian Markets
Before trading Asian markets, understand these unique risks:
- Currency risk: Movements in the yen, yuan, or Hong Kong dollar affect returns
- Liquidity: Some ETFs have lower volume during US hours
- Political risk: Government intervention is more common in Asian markets
- Time zone challenges: Major moves happen while US traders sleep
- Information asymmetry: News breaks in local languages first
Best Ways to Access Asian Markets
US-based traders have several options for gaining exposure to Asian markets:
- ETFs: EWJ, EWH, FXI, and ASHR provide broad exposure
- ADRs: Trade individual Asian stocks like Toyota (TM), Alibaba (BABA), or Sony (SONY)
- Futures: Nikkei and other Asian index futures trade on US exchanges
- Options: Trade options on Asian ETFs for leveraged exposure
Track Your Global Market Trades
Pro Trader Dashboard helps you track trades across all markets, including Asian ETFs and ADRs. Monitor your international exposure and see how global positions affect your portfolio.
Summary
Asian markets offer valuable opportunities for informed traders. The Nikkei 225, Hang Seng Index, and Shanghai Composite each provide unique exposure to different aspects of Asian economic growth. By understanding trading hours, correlations, and key economic events, you can use Asian market movements to improve your trading decisions in US markets.
Want to learn more about global market analysis? Check out our guide on the VIX Index or learn about trading FOMC meetings.