Who Plays the Key Role among Shanghai, Shenzhen and Hong Kong Stock Markets？

In this paper we examine the daily frequency stock market indices of Shanghai, Shenzhen and Hong Kong from January 2000 to June 2012, and use the Morlet wavelet coherence model to determine who is playing the most important role in the financial markets of China. We find that there are significant comovements between these stock markets in the medium and long run. This provides investors with opportunities to increase their capital gains. The Hong Kong stock market plays a leading role in the long run, but its leader position is threatened by fast‐growing Chinese mainland stock markets, especially the Shanghai Stock Exchange. Based on our analysis, the following suggestions apply to the Chinese stock markets: establish and improve international and regional finance centers in Chinese mainland; encourage more qualified institutional investors; reposition the market relations among Hong Kong, Shanghai and Shenzhen; and increase deregulation and internationalization to speed up the integration of financial resources.     

香港人民币离岸市场发展的经济效应考察

新世纪以来,香港人民币离岸市场在衍生品交易、存款规模、跨境结算系统、债券及股票市场等方面快速发展,对于人民币汇率形成机制的市场化改革、分流大陆过剩流动性、推动人民币国际化和金融开放、便利企业规避汇率风险、降低融资成本等方面发挥了积极作用,但也对大陆宏观金融调控和监管带来了潜在冲击。     

中国股票市场国际化刍议

国际化是股票市场发展成熟的必然选择,20年来中国股市一直都在进行国际化探索。本文探讨了中国股市国际化的本质要求、问题和条件。研究表明,中国股票市场的发展取得了巨大成就并逐步走向成熟,这与坚持国际化发展方向紧密相关,国际化深刻影响着中国股市制度和股市结构。要实现股市国际化的最终目标,除了逐步完善国际化的基本条件、推出A股市场国际版外,应重点考虑实行新股发行注册制并在人民币国际化大趋势中逐步推动深港交易所的合并。     

Financial crises,Asian stock indices,and current accounts: An Asian-U.S. comparative study

This paper investigates the effects of financial crises-based exchange rate, real interest rate, and personal consumption expenditure on stock market indices and balances of current account in four Asian countries/areas, and the U.S. from 1997 to 2010. Results obtained from Sims's first-order DSGE representation suggest that two policy variables – changes in the exchange rate and changes in the real interest rate lagged by one quarter – act as stabilizers for contemporaneous changes in stock indices for Thailand, Malaysia, and the U.S., but as destabilizers for Taiwan and Hong Kong. However, changes in personal consumption expenditure lagged by one quarter only play a destabilizing role in Hong Kong. For contemporaneous changes in the current account balance, all three policy variables become destabilizers for all five countries except the one-quarter lagged change in real interest rate, which acts as a stabilizer in Malaysia.     

Are stronger executive incentives associated with cross-listing? Evidence from China

This study examines whether firms incorporated in mainland China benefit from cross-listing in Hong Kong, China. The Hong Kong Stock Market has more stringent rules regarding corporate governance and a better system of investor protection than the mainland market. Hong Kong companies generally provide strong incentives to executives via equity-based compensation. Have cross-listed companies learned from Hong Kong firms about adopting these strong executive incentives? The evidence from this study suggests that changes in top executive compensation are more sensitive to sales growth in cross-listed firms than they are in mainland firms without cross-listing. However, compared to Hong Kong firms, cross-listed firms are less sensitive to stock returns. Further, this study shows that it is necessary to differentiate between state-owned companies and private companies, as cross-listing may have a greater impact on executive incentives in state-owned companies than it does in private companies.     

An overview of Asian equity markets

This study overviews the development of 11 Asian equity markets, namely, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan, and Thailand. Prior to the onset of the global financial crisis, the Asian stock exchanges were generally bullish, underpinned particularly by China's robust economic performance. Innovations in financial products and services have been growing in importance, as stock exchanges in these countries have been making a concerted effort to introduce new features and best practices, with the objectives of raising market efficiency, enhancing service quality, and generally bringing operations up to par with international standards. But the potential to realize or support market efficiency can only be possible within an adequate legal framework, a sound market infrastructure, and appropriate corporate governance mechanisms. Thus, many challenges are still to be overcome in the region.     

Does Property Rights Reform Improve the Efficiency of China＇s State-owned Banks？

China ＂s state-owned banks have undergone radical changes over the past two decades, including partial privatization and listing in both the Hong Kong Stock Exchange and the Shanghai Stock Exchange. This paper evaluates the effects of these changes by analyzing the efficiency of Chinese banks over the period 1998-2012 using two frontier techniques and comparative analysis. The findings suggest that the performance and technical efficiency of the Big Four banks improved considerably after property rights reform, but this improvement is not sufficient to keep the banks at the production frontier. Tobit regressions confirm that static ownership effects are negative but that the property rights reform has had significant and positive effects on the technical efficiency of state-owned commercial banks. GDP growth and the financial crisis have had positive effects on the efficiency of Chinese banks, which is more significant for joint stock commercial banks than state-owned commercial banks. The results indicate the value of ownership reforms of state-owned asset management companies and insurance companies and the establishment of a countercyclical capital buffer.     

Lessons from the global financial crisis – the case of Mainland China and Hong Kong

Abstract

The analysis of the intertwined reactions of Hong Kong and Mainland China to the 2008 Global Financial Crisis is considered in this study through the lenses of their stock markets. The GARCH-based analysis of stock market performance over the period December 2011–December 2014 shows that trade and equity sectors were the sectors most affected by the global recession; volatility was prevalent on the Shanghai stock market, whereas volatility persistence characterised the Hong Kong stock market. The results also show that the two stock markets recovered quite quickly. Tight controls applied by the financial authorities helped ensure some stability during the crisis.     

Renminbi internationalisation: precedents and implications

Although it is commonly assumed that there are no precedents against which to benchmark Renminbi (RMB), this study argues that the People’s Republic of China (PRC) own development experience provides a useful perspective on the internationalisation debate. This study indicates that lessons can be learnt from both the successes and the shortcomings of efforts to internationalise the RMB in the 1970s. During this period, state-owned banks in Hong Kong played a central role in mobilising finance for foreign trade. Access to Hong Kong’s financial institutions allowed the PRC to maximise international trade receipts while minimising the risk of undue swings in capital flows. This study shows that although China no longer faces foreign exchange scarcity, economic reforms have not yet resolved vulnerabilities in China’s financial institutions. As a consequence, Hong Kong has retained its role in mitigating the risks of internationalisation and as a globalising force for China’s banking sector more generally.     

THE HONG KONG CURRENCY BOARD'S DEFENSE AGAINST FINANCIAL MARKET PRESSURE: A BEHAVIORAL PERSPECTIVE

Exchange rate regimes do not operate in an institutional vacuum, even when the scope for exercising policy discretion is distinctly limited. The Hong Kong linked exchange rate system is no exception. An interesting feature of the institutional environment in this case, not highlighted previously, is the apparent divergence in the assumptions of policymakers and market players regarding the merits of this mechanism in particular and currency boards in general. The corollary is that the Hong Kong monetary authorities need to intensify their efforts to disseminate relevant information, focusing especially on targets in the financial sector.     

“港股直通车”对两地股市影响的实证分析

本文以股权分置改革后的最新数据为研究对象,首先剖析了香港股市与内地股市的高度关联性,然后运用计量经济方法检验两地股市的相关性、以及“港股直通车”前后两地股市关系发生的变化,从而得出结论：在当前背景下,不宜推出“港股直通车”。这也证明了中央暂停港股直通车的合理性与及时性。     

福利危机与改革路径——20世纪90年代以来的香港社会救助

作为全球最活跃的经济体之一,香港一直坚持低税制、低福利、高发展的路线,并根据自身情况建立了一套具有香港特色的社会救助制度。但是,20世纪90年代后,经济、社会等领域发生的重大变化导致这一制度面临诸多问题。为此,香港政府进行了一系列改革,改革汲取了当代全球先进福利理念及经验,在许多方面突破了单纯强调收入援助的传统救助模式,而转向一种新的具有社会投资倾向的积极救助模式。     

Chinese Offshore RMB Currency and Bond Markets： The Role of Hong Kong

This paper discusses the role of Hong Kong in China’s grand scheme to build up the RMB as a global reserve currency.We highlight the economic importance of Hong Kong to China in terms of channeling foreign direct investment into China,some of which,in the future,will be denominated in the RMB.We discuss the development of China’s RMB currency swap and deposit markets in Hong Kong.These offshore markets enable the RMB to trade freely, setting the stage for the RMB to become fully convertible and allowing market forces to play a role in pricing the value of the RMB,and help in the development of the RMB-denominated bond(or dim sum bond)market in Hong Kong.Finally,we present evidence of the phenomenal growth of the dim sum bond market in Hong Kong,which can further enhance and strengthen the use of the RMB outside China.     

The foreign exchange exposure of Chinese banks

Using the capital market approach and the equity price data of 14 listed Chinese banks, this empirical study finds that there is a positive relationship between bank size and foreign exchange exposure. This relationship may reflect the larger foreign exchange operations and trading positions of larger Chinese banks and their significant indirect foreign exchange exposure arising from impacts of the renminbi exchange rate movements on their customers. Empirical evidence also suggests that the average foreign exchange exposures of state-owned and joint-stock commercial banks in China are higher than those of banks in Hong Kong, notwithstanding their limited participation in international banking businesses compared with their Hong Kong counterparts. It is also found that negative foreign exchange exposure is prevalent for larger Chinese banks, suggesting that an appreciation of the renminbi tends to reduce their equity value. It is therefore likely that the banking sector's performance will be hampered. Together with the fact that decreases in equity values generally imply a higher default risk, the effects of different scenarios of renminbi appreciation on the default risk of Chinese banks should therefore be closely monitored.     

Indonesia's stock market: evolving role,growing efficiency

The banking sector traditionally dominated Indonesia's financial system, and until the 1990s the stock market remained of little significance. Re-opened in 1977 after two decades of inactivity, the stock exchange made little contribution to Indonesia's development until a series of reform and deregulation measures were implemented from December 1987. This study examines the evolving role of the stock market in the financial system, and analyses changes in its efficiency over time. We find that stock market activity grew markedly in importance relative to banking after the reforms began to take effect, gaining the ascendancy in 2004 and moving well ahead subsequently. One contributor to this success is improvement in efficiency. Using two simple technical trading rules, we demonstrate that the stock exchange secondary market has indeed become significantly more efficient over time.     

Output volatility of five crisis-affected East Asia economies

A decade has passed since the Asian financial crisis (AFC) in 1997, and attention is drawn to the output performance of the crisis-affected economies in East Asia. Using the Hodrick–Prescott (HP) filter, this paper examines the growth volatility of GDP, its components and the stock market of five East Asia economies of Japan, Singapore, South Korea, Chinese Taipei and Hong Kong Special Administrative Region (SAR). Empirical evidences based on quarterly data show that output volatility for both Singapore and South Korea has increased after the AFC. For the GDP components, trade is a major factor in lowering GDP volatility in Chinese Taipei. The Hong Kong SAR economy has experienced an increase/decrease in the volatility of investment/private consumption. Among the five East Asia economies, government intervention is obvious in Singapore. The stock markets in both Hong Kong SAR and Chinese Taipei showed stronger ability in absorbing shocks.     

The effect of index futures trading on volatility: Three markets for Chinese stocks

This paper examines whether the introduction of Chinese stock index futures had an impact on the volatility of the underlying spot market. To this end, we estimate several Generalized Auto-regressive Conditional Heteroscedasticity (GARCH) models and compare our findings for mainland China with Chinese index futures traded in Singapore and Hong Kong. Our results indicate that Chinese index futures decrease spot market volatility in all three spot markets considered. In contrast, we do not obtain the same results for the companion index futures markets in Hong Kong and Singapore. China's stock market is relatively young and largely dominated by private retail investors. Nevertheless, our evidence is favorable to the stabilization hypothesis usually confirmed in mature markets.     

The co-movement of stock markets in East Asia: Did the 1997–1998 Asian financial crisis really strengthen stock market integration?

This paper examines the integration and causality of interdependencies among seven major East Asian stock exchanges before, during, and after the 1997–1998 Asian financial crisis. For this purpose, we use daily stock market data from July 1, 1992 to June 30, 2003 in local currency as well as US dollar terms. The data reveal that the relationships among East Asian stock markets are time varying. While stock market interactions are limited before the Asian financial crisis, we find that Hong Kong and Singapore respond significantly to shocks in most other East Asian markets, including Shanghai and Shenzhen, during this crisis. After the crisis, shocks in Hong Kong and Singapore largely affect other East Asian stock markets, except for those in Mainland China. Finally, considering the role of the USA shows that it strongly influences stock returns in East Asia – except for Mainland China – in all periods, while the reverse does not hold true.     

Market Risk in Demutualized Self-Listed Stock Exchanges: An International Analysis of Selected Time-Varying Betas

Abstract

This article examines market risk in four demutualized and self-listed stock exchanges: the Australian Stock Exchange, the Deutsche Börse, the London Stock Exchange and the Singapore Stock Exchange. Daily company and the Morgan Stanley Capital International (MSCI) Index returns provide the respective asset and market portfolio data. A bivariate GARCH model is used to estimate time-varying betas for each exchange from listing until 7 June 2005. While the results indicate significant beta volatility, unit root tests show the betas to be mean-reverting. These findings are used to suggest that despite concerns that demutualized and self-listed exchanges entail new market risks that merit regulatory intervention, the betas of the exchange companies have not changed significantly since listing. However, market risk does vary considerable across the exchanges, with mean time-varying betas of 0.56 for the Deutsche Börse, 0.66 for the London Stock Exchange, 0.78 for the Singapore Stock Exchange, and 0.95 for the Australian Stock Exchange.     

Renminbi Derivatives： Recent Development and Issues

This study reviews the developments in the onshore and offshore renminbi derivatives markets. The onshore market has seen a rapid build‐up in the market infrastructure and price discovery mechanism in the past year, with empirical evidence suggesting that its pricing is increasingly determined by financial fundamentals, such as the covered interest rate parity. However, the growth of the market has been restrained by restrictions on the participant base, limited variations in the RMB/US$ exchange rate, market participants’lack of technical capacity and experience, and inadequate supporting financial market infrastructure. The non‐deliverable forward (NDF) market, concentrated in Hong Kong and Singapore, is more developed, but has the drawback that its pricing is not tied to financial fundamentals. The comparison between onshore and offshore markets suggests that two issues are of particular importance for future derivatives market development in China: the balance between regulation and development, and the relationship between onshore and offshore markets.