Abstract
This paper examines the relationship of financial liberalization and stock markets integration among ASEAN-5 (Note 1) stock markets: Indonesia, Malaysia, the Philippines, Singapore and Thailand. Three sample periods are covered based on the progress of financial liberalization. By using Johansen and Juselius multivariate cointegration procedures, Granger-causality tests and variances decomposition analysis, the results indicate no long-run relationship during Singapore stock market liberalization in the first period. However, long-run relationship established between ASEAN-5 stock markets in the second period when Thailand, Malaysia and Indonesia have liberalized their stock markets and the third period following the Philippines liberalization. The long run integration relationships and the short-run causality relationships among ASEAN-5 markets have both increased after the financial liberalization. Thailand, Malaysia, Indonesia and the Philippines markets have received increased influences from other stock markets in the progress of financial liberalization whereas Singapore remains unaffected by the others. Stock markets that liberalize earlier will have greater influence on other stock markets.
Highlights
Ai-Yee Ooi School of International Business and Finance Labuan Universiti Malaysia Sabah, 11700 Jalan Sg
E-mail: ooiaiyee@yahoo.co.uk Abstract This paper examines the relationship of financial liberalization and stock markets integration among Association of South East Asian Nations (ASEAN)-5 (Note 1) stock markets: Indonesia, Malaysia, the Philippines, Singapore and Thailand
The five ASEAN stock markets namely Indonesia, Malaysia, the Philippines, Singapore and Thailand are the countries originally included in the Association of South East Asian Nations (ASEAN) when the Bangkok Declaration was signed on 8 August 1967
Summary
Ai-Yee Ooi School of International Business and Finance Labuan Universiti Malaysia Sabah, 11700 Jalan Sg. Development of the financial sector has been a salient policy goal for most ASEAN member since the mid-1980s In the latter half of 1980s and early years of 1990s, most of the governments of ASEAN have gradually liberalized their stock markets. The five ASEAN stock markets namely Indonesia, Malaysia, the Philippines, Singapore and Thailand are the countries originally included in the Association of South East Asian Nations (ASEAN) when the Bangkok Declaration was signed on 8 August 1967 These ASEAN countries have been trying to diversify their heavy reliance on the banking sector in favor of other financial intermediation vehicles including stock and fixed-income markets. It limits the way in which a financial system can price risk efficiently. Rather than looking through a global perspective, this study will just focus on the five major ASEAN stock markets
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