Asian Stock Exchanges Research Articles

Comparing Time-Varying Price Impact and Information Impounding Time Across Asian Stock Exchanges: An Adaptive Lasso Approach

In this paper we construct a parsimonious vector autoregression model with durations, trades and quote revisions to compare price impact and information impounding time in four Asian stock exchanges. We conduct simultaneous model selection and estimation using the adaptive lasso approach. We measure the price impact and the information impounding time via examining the impulse response of a new trade. Weekly estimation from January 2007 to August 2012 allows us to compare the time-varying price impacts. We find that the price impact and the information impounding time vary considerably across time. Traders in Korean and Japanese markets pay more attention to high price impact trades while traders in Hong Kong and Chinese markets pay less attention. Larger mean price impact has larger impact uncertainty measured by the price impact’s standard deviation. Longer mean information impounding time has higher convergence uncertainty measured by the information impounding time’s standard deviation. For many stocks, price impacts have spikes during the 2008 financial crisis. The price impact is negatively related to liquidity and positively related to systematic risk. The average correlation among price impacts of different stocks also varies across time. In Korean and Chinese markets, when systematic risk is high, the average correlation among price impacts is also high.

Hong Kong as an Emerging IPO Center and the International Dimension of its Stock Market

The Hong Kong stock market is the third-largest exchange by market capitalization and the second-largest by number of total listings in Asia-Pacific. It attracts investors locally, from within, and from outside Asia. Overseas investors account for approximately 40% of overall participation in the Hong Kong securities market since 2000. This thriving market lures numerous Chinese companies to launch their IPOs in it, and thereby became the top IPO fundraising center in 2009. Despite the negative impact from the debt crisis, the future development of the market seems promising, as the amount of IPOs fundraised thus far this year is about $3.7 billion and several firms are ready to float in Hong Kong later in the year.But this is only what a bird’s eyes view reveals. Drilling deeper, a different picture emerges, one where the Hong Kong stock market, rather global as it is in its investor base, is revealed as not being very international in its listings, its longer-term position being therefore less than very firm as other exchanges in the region continue to outpace it in key respects and as the mainland’s economy and policies continue to develop and open up. Three central issue areas are particularly worth focusing on:Composition of stock market participants. Foreign participation is high in Hong Kong, as is true also in most East Asian stock markets. This both leads to and results from the region having efficient platform and information systems, well trained and experienced professionals, and good regulatory frameworks. The Tokyo Stock Exchange, largest in the region and one of the largest in the world, also has the most international investor base among the region’s major exchanges—dominated by foreign investors to the tune of a 56% share. Hong Kong, while somewhat behind on this indicator, is also rather international in its investor base, with overseas investors’ participation in Hong Kong standing at a high 40% which has been stable over time. The Korean stock market has 32.6% investors from overseas. Foreign listings. Despite partial exceptions provided by the Australian and Singapore stock exchanges, Asian stock exchanges tend to have very few foreign listings compared to their counterparts in Europe and North America. Out of the 1321 companies listed on the Hong Kong Exchange by April 2010, 253 companies are from China and only 11 companies are from overseas. This demonstrates the limited external dimension of the Hong Kong stock exchange. For Hong Kong to transit to become a truly international financial center in the medium- or long-term, its stock market needs to have more foreign listings, which in turn requires modifications on primary listing, secondary listing, post listing and international listing rules.Resources companies. A recent trend in the resources sector has been the migration of new listings from producer countries’ to consumer countries’ exchanges—or more specifically to Hong Kong as the gateway to China. Being part of China, the world’s second largest resources consumption country, Hong Kong has thus far been successful in positioning itself as an emerging resources center in East Asia. Initially serving as a venue for Chinese resources companies to raise funds and for foreign investors to tap into the Chinese resources sector, two newcomer resource companies began to float in Hong Kong this January: UC Rusal from Russia and Canadian-based SouthGobi. The resources sector is a niche Hong Kong should seek t establish and develop, as Hong Kong has great potential to be a global mining financing center. But a complex sector it is as resource companies often have a high risk profile: indeed, out of concerns over investor protection and the lack of policies governing the junior resources sector, early-stage exploration companies are not allowed to list in Hong Kong unless they prove the existence of exploitable natural resource reserves and provide a clear production plan. But the potential the sector offers is huge, and with the Hong Kong stock market dominated by financial and property companies, participation from resources companies would help diversify it. Current listing rules for resources companies have to be updated and modernized and the sector also needs assistance from the local authority to conduct more marketing activities.

Growing Competitiveness of South Asian Stock Exchanges on the Global Scenario

Growing Competitiveness of South Asian Stock Exchanges on the Global Scenario

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.

Daily variation, capital market efficiency and predicting stock returns for the Hong Kong and Tokyo exchanges

Studying capital market efficiency is important because result may infer that there are predictable properties of the time series of prices of traded securities on organized markets. We examine the weak form of the efficient markets hypothesis to indicate its usefulness in terms of the results of this study. Furthermore, this study of individual securities prices of traded securities on the organized markets of Hong Kong and Japan corroborate previous findings of studies of individual stocks and market indexes both in Asian nations, the United States and other stock exchanges in the United Kingdom and Europe. Daily patterns are present in the times series of securities prices. You will note also, that the models identified reflect the returns on individual firms listed on the two of the three largest Asian Stock Exchanges.

The co-movement of stock markets in East Asia

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.

A Review of Stock Market Microstructure

This paper provides a review of the market microstructure of the Australian Stock Exchange, five Asian Stock Exchanges, four North American Stock Exchanges and eight European Stock Exchanges. The scope of this review is to present a broad overview of the microstructure of the eighteen selected markets. This encompasses a review of trading mechanisms, pre and post-trade transparency, opening/closing design and other relevant microstructure issues including short selling, principal trading and crossing rules. Examining the microstructure of six of the largest and most influential Stock Exchanges (Exchanges) in the Asian region (including the Australian Stock Exchange), four of the worlds most dynamic markets in North America and eight of Europe's largest and progressive Exchanges allows us to derive a unique perspective of market microstructure at the start of the 21st Century. There are significant differences in microstructure between regions and it is clear that historical, economic and political developments are of major importance in explaining these differences. In addition to differences between regions we observe numerous idiosyncrasies between individual Exchanges. These differences between regions and between individual Exchanges are readily apparent throughout this review. Such a wide-ranging review allows us to draw many conclusions regarding the current themes/trends in market microstructure and issues/challenges facing Exchanges. The review therefore provides a valuable microstructure guide that may be used as a source for future research ideas and to support policy development.