Asian stock markets closed lower on Monday, pressured by escalating diplomatic tensions between China and Japan, sell-offs in key technology sectors, and cautious investor sentiment following U.S. remarks on a potential rare-earth deal. The assessment comes from Timothy Pope, analyst at China Global Television Network (CGTN).

Hong Kong’s Hang Seng fell 0.71%, driven largely by a drop in shares of battery giant CATL, which slid more than 4% after Vice Chairman Huang Shilin sold a 1% stake. Japan’s Nikkei 225 slipped 0.1%, with tourism and cosmetics stocks under pressure alongside a mild tech-sector pullback. Adding to the headwinds, Japan’s economy contracted 1.8% year-on-year in the third quarter.

Mainland Chinese markets also saw cautious trading: the Shanghai Composite declined 0.46%, while the Shenzhen Component edged down 0.11%. According to Pope, investors locked in profits after a flare-up in geopolitical rhetoric, and even previously strong sectors such as rare earths remained largely flat.

Despite short-term volatility, foreign capital inflows into Chinese equities remain robust. From January to October, USD 50.6 billion in offshore funds entered the Chinese market, underscoring continued interest in fast-growing sectors such as electric vehicles and artificial intelligence.