A Different View on ASEAN Capital Market Integration

Capital market integration has become an interesting research topic nowadays. Many studies have tried to explain this phenomenon using various methods. Here, we used sophisticated methods to explain capital market integration. This study aims to scrutinize the Association of Southeast Asian Nations (ASEAN) capital market integration. This study hopefully can enrich the different views regarding the capital market integration and fill the gap left by previous studies. The data used were the stock price index of the monthly closing data of the capital markets in ASEAN countries during the period of January 1999 to December 2020, obtained from Bloomberg and the Indonesia Stock Exchange. Data in this study were analyzed using the wavelet method. The results indicate that there is a long-term integration in the capital markets of ASEAN countries, and the highest level of integration was in the period during and about a year after the global crisis. Using the spectrum analysis, the results show that during period from 2008 to 2010, the level of integration reached its highest level.

Capital Markets in China and Britain, 1770–1860: Evidence from Grain Prices

Based on comprehensive grain price data, we employ a storage model to estimate consistent interest rates and compare capital market development between Britain and China. Interest rates for Britain were lower than China’s on average by about 3 percentage points from 1770 to 1860. For country pairs with bilateral distance less than 200 kilometers, the regional capital market integration in the Yangzi Delta in China comes close to the British average; but at larger distances, spatial interest rate correlations in Britain are twice those of the Delta and three or more times as high as elsewhere in China. Overall, our results suggest capital market development differences at an early date, so that capital market performance may be important for the Great Divergence that emerged between China and Western countries at this time. (JEL E43, E44, N23, N25, N53, N55, Q11)

ISLAMIC CAPITAL MARKET INTEGRATION AND ASYMMETRIC INFORMATION: A STUDY IN THE FIVE ASEAN COUNTRIES FROM THE POST-GLOBAL FINANCIAL CRISIS

This study aims at examining the integration impact of the five ASEAN Islamic capital markets on asymmetric information for ASEAN Economic Community (AEC) development. Utilizing samples of market and financial panel data from 2009 to 2015 among the five ASEAN Islamic capital markets, and applying two-country portfolios of the Islamic capital markets among the five ASEAN countries to measure the different levels of Islamic capital market integration, this study suggests that the different levels of the Islamic capital market integration between Indonesia and Malaysia are found to result in asymmetric information negatively. The strongest Islamic capital market integration between Indonesia and Malaysia affect reduced asymmetric information more consistently than the other two-country portfolios, while the weakest level of integration between the Philippines and any other four Islamic capital markets that affects asymmetric information inconsistently is also supported. These results confirm an interplay between a modern portfolio theory, Efficient Market Hypothesis (EMH), contract theory, and general economic theory, and also provide new insights for stakeholders in investment decisions and strategies, cross-border regulation of economic resources, and other plentiful benefits.

Banks’ Foreign Claims in the Aftermath of the 2008 Crisis: Institutional Response, Financial Efficiency, and Integration of Cross-Border Banking in the Euro Area

Beyond financial stability as the European Banking Union’s primary objective, the European capital market integration provides an impetus for deepening bank integration and greater financial market efficiency. This article proposes an empirical framework to assess the dynamics of euro area banks’ business networking. We use banks’ foreign claims across Europe, particularly the euro area, to see how banks react to various macroeconomic signals. Banks’ foreign claims are particularly interesting due to their sensitivity. One of the main conclusions is that the euro area has seen a reallocation of capital in the aftermath of the 2008 crisis. The financial picture of Europe is different after the recent financial crisis. Although we observe a re-concentration of capital from the periphery to the core countries, we also observe some signs of recovered confidence within the European banking framework for macro-prudential reasons.

Hedge effectiveness of put replication, gold, and oil on ASEAN-5 equities

The previous studies have shown that capital market integration has increased in the ASEAN-5, implying that investors making investment diversification across ASEAN capital markets could only earn limited diversification advantages. To diversify their portfolios, equity investors must find other assets. The main focus of this research is to analyze the effectiveness of put replication, gold, and oil on hedge equities in the ASEAN-5 (Indonesia, Malaysia, Singapore, Thailand, and the Philippines). Protective put strategy, DCC-GARCH, and Markowitz optimization are used to measure hedge effectiveness, risk-adjusted-performance such as Sharpe ratio, drawdown, and Omega ratio. The result reveals that gold is a cheaper hedge than oil and oil-hedged strategy is more expensive in ASEAN-5 compared to oil exporting nations. Also, investors with big exposure to the oil-related portfolio should diversify to Philippine equity. From hedging effectiveness and risk-adjusted-performance perspectives, oil is less attractive than money market instruments and gold. This study also implies that risk-averse investors should prefer to put replication or guaranteed financial products compared to commodities-hedged strategy.