Investing.com– Most Asian stocks fell on Friday but Chinese shares extended gains on AI optimism despite U.S. tariffs, while focus turned to the Reserve Bank of India’s interest rate decision due later in the day.

U.S. stock index futures were largely unchanged in Asian trading after a mixed close on Wall Street.

RBI rate decision in focus; Asian central banks see  pre-emptive rate cuts

The RBI will decide on its interest rates and cash reserve ratio later in the day. 

Economists widely expect the central bank to cut the benchmark repo rate by 25 basis points to 6.25%, marking the first rate reduction since May 2020.

India’s Nifty 50 Futures signaled a positive start at the open.

Recent domestic data showed that India's retail inflation eased to a four-month low of 5.2% in December, but was still above the RBI's medium-term target of 4%.

On the growth front, India's economy is projected to expand at 6.4% in the current fiscal year, a slowdown from the 8.2% growth recorded in the previous year.

These factors, coupled with growing uncertainty around U.S. policies, have bolstered bets for a rate cut.

“Due to uncertainty surrounding tariffs and external demand, Asian central banks are becoming more cautious about the domestic growth outlook, leading to pre-emptive rate cuts.” ING analysts said in a recent note.

Recently, Singapore eased monetary policy for the first time in almost five years, while Indonesia saw unexpected rate cuts.

China stocks rise bucking the regional trend

Despite the imposition of 10% tariffs by the Donald Trump administration on Chinese goods, China's AI sector, led by companies like DeepSeek, has demonstrated resilience, bolstering investor confidence.

China’s Shanghai Composite rose 0.8% on Friday, while the Shanghai Shenzhen CSI 300 index jumped 1%. Hong Kong’s Hang Seng index advanced 0.9%. 

Hong Kong-listed Lenovo Group (HK:0992) jumped 7.5%, while Xiaomi (OTC:XIACF) Corp (HK:1810) rose 4.8%.

Elsewhere, most regional stocks were lower amid global uncertainty around Donald Trump’s policies, keeping investors away from riskier assets.

Indonesia’s Jakarta Stock Exchange Composite Index slumped 1.7%, while Thailand’s SET Index declines 1.9%

Japan’s Nikkei 225 lost 0.5% while TOPIX fell 0.4%. 

South Korea's KOSPI index was 0.3% weaker, while Singapore's Straits Times Index was largely unchanged.

Australia's S&P/ASX 200 index advanced 0.4%.