Asian markets closed out the year on a subdued note amid thin holiday trading, capping a year of strong gains driven by enthusiasm for artificial intelligence stocks and resilient risk appetite.
Elsewhere, geopolitical tensions resurfaced with a Ukrainian drone attack on a major Russian oil refinery, the United Nations approved budget cuts amid a funding crunch, and China’s latest data showed manufacturing activity returning to expansion for the first time since March, offering a modest boost to sentiment.
Asian markets drift at year-end as AI boom dominates 2025
Asian stocks drifted on the final trading day of the year, with investors reflecting on a period marked by strong equity returns despite tariff tensions, geopolitical risks, and policy uncertainty.
MSCI’s broadest index of Asia-Pacific shares outside Japan was unchanged at 0.02% gain on Wednesday and is set to post a 27% gain for the year, its strongest performance since 2017.
Much of that advance was driven by a rally in chipmakers amid the artificial intelligence boom.
China’s blue-chip index edged higher and is on track for a 21% annual gain, while Hong Kong’s Hang Seng slipped 0.8% on the day but is still poised for a 30% rise in 2025.
South Korea’s Kospi stood out as the world’s best-performing major market, up 76% for the year, with gains led by SK Hynix and Samsung.
Currency and commodity markets also reflected the year’s major themes.
The US dollar is heading for a 9.4% annual decline, its worst since 2017, leaving the euro and sterling with strong gains.
Gold is on track for a 66% rise in 2025, while silver’s gains exceeded 160%, despite some late-year profit-taking.
Ukrainian drone attack hits key Russian oil refinery
Geopolitical risks remained in focus after a Ukrainian drone attack injured two people and sparked a fire at the Tuapse oil refinery in Russia’s Krasnodar region, according to local authorities.
The blaze, which burned around 300 square metres, was quickly extinguished, though officials did not disclose whether refinery operations were halted.
The strike reportedly damaged refinery equipment, one port berth, and several homes nearby.
Tuapse is a critical Black Sea outlet for Russian oil products and is anchored by Rosneft’s export-oriented refinery, which has a capacity of about 240,000 barrels per day.
The facility and port have been targeted repeatedly during the war, at times disrupting operations.
UN approves budget cuts amid deepening financial strain
The United Nations General Assembly approved a $3.45 billion operating budget for 2026, representing a 7% cut from this year, as the organization grapples with a financial crisis driven largely by unpaid dues.
The reduction includes the elimination of around 2,900 positions.
UN Secretary-General Antonio Guterres has warned that liquidity remains fragile due to a high level of arrears, most of which are owed by the United States.
While the US typically contributes 22% of the UN’s regular budget, it has not paid its 2025 dues and still owes significant arrears from previous years.
China manufacturing activity returns to expansion
China’s economy ended the year with a modest improvement in momentum, as official data showed factory activity expanding in December for the first time since March.
The official manufacturing purchasing managers’ index rose to 50.1 in December from 49.2 in November, beating expectations.
Broader indicators also improved, with the composite PMI climbing to 50.7 and the non-manufacturing PMI rising to 50.2.
The gains were driven mainly by large enterprises, while smaller firms continued to lag.
Economists described the data as a positive surprise, even as challenges persist from a property sector slump and softer recent economic readings.
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