## Closer, Ever Closer

_IMF Blog, May 17, 2012_

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## Bibliographic details
- Authors: Anoop Singh
- Published: May 17, 2012

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### Capital market integration
- Over the past two decades, Asia’s equity markets have become increasingly sensitive to global financial developments, in line with the region’s growing role in the global economy.
- Equity returns in Asia generally now move in tandem with those in systemic economies (examples given: the United States and the United Kingdom).

### Measuring interconnectedness
- Asian financial “betas” are used to measure volatility and capture the impact of systemic economies on Asian equities.
- Interpretation:
  - A positive beta means the asset's returns generally follow the market's returns.
  - A negative beta means the asset's returns are generally unmoved by the market.
- Asian financial betas have followed a modest, but steady upward trend over the past two decades.
- Spikes in global financial shocks (for example, the bursting of the technology bubble or recent euro area turmoil) are mirrored by similar spikes in Asian financial betas.

### Key findings and evidence
- The global financial shock associated with the Lehman Brothers bankruptcy explains nearly 90 percent of the pickup in financial betas across Asia from 2002‒07 to 2008–11.
- Financial betas differ across countries:
  - East Asia (including Singapore and Hong Kong, SAR) has the highest financial betas and tends to be more financially integrated, mirroring global ups and downs more closely.
  - Countries that pursued a more gradual pace of capital market integration, such as China, generally had lower financial sensitivity to the systemic economies.
- Conclusion: Given high—and increasing—financial interconnections, Asian markets will never be completely insulated against major global financial shocks.

### Policy implications and recommendations
- Macroeconomic policies matter: the choices made by Asia’s policymakers can help determine the region’s financial betas.
- Specific associations identified:
  - A lower government debt-to-GDP ratio is associated with lower financial betas.
  - A higher stock of international reserves, but up to a limit, is associated with lower financial betas.
- Sound macroeconomic policy frameworks are associated with lower financial betas in Asia during both tranquil and turbulent periods.
- Implication: Sound macroeconomic policies may help limit the impact of major downside risks on the real economy.

*Anoop Singh, May 17, 2012 — Closer, Ever Closer*

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## Content in this bundle

- **より近く、より密接に; アヌープ・シン; iMF direct ブログ 2012年5月17日掲載**
  - [より近く、より密接に; アヌープ・シン; iMF direct ブログ 2012年5月17日掲載 (Markdown version)](/external/japanese/np/blog/2012/051712j.pdf.md){rel="alternate" type="text/markdown"}
  - [より近く、より密接に; アヌープ・シン; iMF direct ブログ 2012年5月17日掲載 (PDF)](/external/japanese/np/blog/2012/051712j.pdf){rel="external" type="application/pdf"}

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## References

- [https://www.imf.org/wp-content/uploads/2012/05/slide1-3.jpg](https://www.imf.org/wp-content/uploads/2012/05/slide1-3.jpg)

_Source: https://www.imf.org/en/blogs/articles/2012/05/17/closer-ever-closer_