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Understanding Asian equity flows, market returns and exchange rates

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  • Chayawadee Chai-Anant
  • Corinna Ho

Abstract

This paper examines from various angles foreign investors' daily transactions in six emerging Asian equity markets and their relationship with local market returns and exchange rate changes over the period 1999-2006. Confirming much of the literature, we find that equity market returns matter for net equity purchases, and vice versa. In addition, we find that while currency returns tend to show little influence over foreign investors' demand for Asian equities, net equity purchases do have some explanatory power over near-term exchange rate changes. Moreover, we find that foreign investors do quite often move in or out of multiple Asian markets simultaneously - but more so on the way in than on the way out. Nonetheless, during specific events of heightened market volatility, we observe some interesting deviations from the full-sample average relationships.

Suggested Citation

  • Chayawadee Chai-Anant & Corinna Ho, 2008. "Understanding Asian equity flows, market returns and exchange rates," BIS Working Papers 245, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:245
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    References listed on IDEAS

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    Cited by:

    1. Yilmaz Akyuz, 2015. "The Global Economic Crisis and Asian Developing Countries: Impact, Policy Response and Medium Term Prospects," Working Papers id:7062, eSocialSciences.
    2. repec:bla:sajeco:v:85:y:2017:i:1:p:3-27 is not listed on IDEAS
    3. Nasha Ananchotikul & Chayawadee Chai-anant & Krist Dacharux & Manop Udomkerdmongkol, 2009. "Thailand’s Medium-term Macroeconomic Policies: Major Challenges and Appropriate Responses," Working Papers 2009-05, Monetary Policy Group, Bank of Thailand.
    4. repec:eee:jimfin:v:81:y:2018:i:c:p:40-55 is not listed on IDEAS
    5. Gelman, Maria & Jochem, Axel & Reitz, Stefan & Taylor, Mark P., 2015. "Real financial market exchange rates and capital flows," Journal of International Money and Finance, Elsevier, vol. 54(C), pages 50-69.
    6. Jotikasthira, Chotibhak & Lundblad, Christian & Ramadorai, Tarun, 2013. "How do foreign investors impact domestic economic activity? Evidence from India and China," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 89-110.
    7. Haakon Kavli & Nicola Viegi, 2017. "Are Determinants of Portfolio Flows Always the Same? - South African Results from a Time Varying Parameter Var Model," South African Journal of Economics, Economic Society of South Africa, vol. 85(1), pages 3-27, March.
    8. Gyntelberg, Jacob & Loretan, Mico & Subhanij, Tientip, 2018. "Private information, capital flows, and exchange rates," Journal of International Money and Finance, Elsevier, vol. 81(C), pages 40-55.
    9. Robert N. McCauley, 2010. "Managing Recent Hot Money Inflows in Asia," Chapters,in: Managing Capital Flows, chapter 5 Edward Elgar Publishing.
    10. Jakree Koosakul, 2016. "Daily Movements in the Thai Yield Curve: Fundamental and Non-Fundamental Drivers," PIER Discussion Papers 30., Puey Ungphakorn Institute for Economic Research, revised Jun 2016.
    11. Gyntelberg, Jacob & Loretan, Mico & Subhanij, Tientip & Chan, Eric, 2014. "Exchange rate fluctuations and international portfolio rebalancing," Emerging Markets Review, Elsevier, vol. 18(C), pages 34-44.

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    Keywords

    Asian equity markets; foreign investor; market returns; currency returns; exchange rate;

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