Table of Contents

A New Financial Market Structure for East Asia

A New Financial Market Structure for East Asia

Edited by Yung Chul Park, Takatoshi Ito and Yunjong Wang

This book contends that the East Asian financial constitution lacks an appropriate infrastructure, resulting in inefficient allocation of high savings and an over-inflated short-term debt market. It goes on to point out that despite high savings, East Asia’s dependency on financial centers outside the region is also relatively high, and that there is no strong region-wide network to connect various financial centers in East Asia.

Chapter 17: How to Mobilize Asian Savings within the Region: Securitization and Credit Enhancement for the Development of East Asia’s Bond Market

Gyutaeg Oh, Dae Keun Park, Jaeha Park and Doo Yong Yang

Subjects: asian studies, asian economics, economics and finance, asian economics, financial economics and regulation

Extract

17. How to mobilize the Asian savings within the region: Securitization and credit enhancement for the development of East Asia’s bond market Gyutaeg Oh, Dae Keun Park, Jaeha Park and Doo Yong Yang 1. INTRODUCTION The way and structure of capital movement in East Asia present highly significant implications on the development of East Asia’s capital market. Traditionally, capital inflows in most East Asian countries except for Japan consisted of public financing and bank loans. With the turn to the 1990s, capital inflows started to take various forms, as investors from advanced economies diversified their assets internationally. The changes in the form of capital flows in East Asia have been induced by both push and pull effects. That is to say, with low interest rates and dropping asset investment returns due to economic slowdown in advanced economies, investors’ demand for investment in emerging market portfolio began to soar. At the same time, major East Asian countries relaxed their regulatory measures on foreigners’ portfolio investment through capital liberalization, further spurring the changes in the form of capital inflow into East Asia. On the other hand, the Asian crisis in 1997 has brought significant changes to the form of capital flows in East Asia, and to the structure of capital market in the region. One of the biggest changes in the capital movement in East Asia and development of the East Asian capital market is the current account surplus of most major East Asian countries,...

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