2012年-IMF国际货币组织全球_Exchange_Rate_Fluctuations_and_International_Portfolio_Rebalancing_in_Thailand_19页_933kb

Summary of "Exchange Rate Fluctuations and International Portfolio Rebalancing in Thailand"

Core Content

This working paper explores the relationship between exchange rate fluctuations and international portfolio rebalancing in Thailand, using data from 2005 to 2006. The study focuses on the impact of capital flows from nonresident investors on the Thai baht (THB) and examines whether these investors hedge their foreign exchange (FX) risk or not.

Main Hypotheses and Findings

Hypotheses

• Hypothesis 1: Net inflows into the Thai stock market by foreign investors should be positively correlated with an appreciation of the Thai baht.
• Hypothesis 2: Higher dollar-denominated SET returns relative to US equity market returns should be associated with net sales of Thai equities by foreign investors.
• Hypothesis 3: Higher dollar-denominated SET returns relative to US equity market returns should be associated with a depreciation of the Thai baht.

Empirical Findings

• Portfolio Rebalancing and Exchange Rate: Higher returns in the Thai equity market relative to a reference stock market are associated with net sales of equities and a depreciation of the baht. Conversely, net purchases of Thai equities lead to an appreciation of the baht. On average, a US$ 100 million inflow results in a 0.15% appreciation of the baht.
• Imperfect Hedging: Foreign investors do not hedge FX risk related to their equity market positions, or do so imperfectly. This means they are exposed to both equity and currency risk when holding Thai stocks.
• FX Swap Activity: FX swap transactions, which are typically used for hedging, are not significantly influenced by equity market returns or transactions. The regression results show that none of the slope coefficients are statistically significant, and the adjusted R² is only 0.05, indicating that FX swap activity is not a good proxy for hedging behavior.
• FX and Stock Market Relationships: The study finds that FX returns are influenced by nonresident order flow in the FX market and the stock market, as well as macroeconomic indicators. However, the relationship is not strong, suggesting that FX and stock market dynamics are not tightly linked in the way previously assumed.
• Exchange Rate Movements and Investment: Unlike earlier studies that found momentum trading driven by FX fluctuations, this paper shows that exchange rate movements were not key drivers of nonresident equity investments in Thailand during the sample period.

Key Information

• Data Sources: The study uses comprehensive datasets from the Bank of Thailand (BOT) and the Stock Exchange of Thailand (SET), covering daily FX and stock market transactions of nonresident investors.
• Sample Period: From January 2005 to December 15, 2006. A structural break occurred in December 2006 due to new capital control measures.
• Nonresident Investors: Defined as corporations, institutions, funds, and individuals located outside Thailand. Financial institutions are the dominant group, accounting for over 90% of transactions.
• Nonresident Baht Accounts (NRBAs): Required for holding bank balances in Thailand, with a daily limit of THB 300 million per nonresident.
• FX Market Characteristics: The onshore FX market is an over-the-counter market with daily transaction limits. FX swaps are a key instrument, but not a good proxy for hedging.
• Equity Market: The SET index is the main equity market indicator. Settlement is on a T+3 basis, and there is a high level of volatility during the sample period.

Structure of the Paper

• I. Introduction: Discusses the importance of understanding the role of international capital flows in exchange rate determination and outlines the research objectives.
• II. Portfolio Rebalancing: Presents the theoretical framework and hypotheses based on portfolio balance models, focusing on the relationship between equity returns and FX movements.
• III. The Markets and the Data: Describes the Thai FX and equity markets, including the sample period, nonresident investor definition, and data sources.
• IV. Empirical Findings: Reports the results of regression analyses, including the lack of significant relationships between FX swaps and equity market variables, and the impact of capital flows on the exchange rate.
• V. Concluding Remarks: Summarizes the findings and highlights the implications for understanding capital flows and exchange rate behavior in Thailand.

Tables and Figures

• Table 1: Summary statistics of nonresident FX transactions in Thailand, showing daily volume and order flow for different FX contract types.
• Table 2: Summary statistics of nonresident equity transactions, including daily volume and net capital flows.
• Table 3: List of variables used in the regression models.
• Table 4: Results of the regression of FX swap order flow on stock market returns and order flow.
• Table 5: Results of the regression of FX returns on order flow and macroeconomic proxies.
• Figure 1: Shows the Thai baht/U.S. dollar exchange rate and SET index from 2005 to 2006, highlighting the depreciation and appreciation trends.

Conclusion

The paper concludes that international portfolio rebalancing significantly affects the Thai baht's exchange rate, with nonresident investors' capital flows playing a key role. It also emphasizes that foreign investors do not hedge FX risk effectively in the Thai equity market, leading to exposure to both equity and currency risk. These findings contribute to the understanding of how capital flows and exchange rate movements interact in an emerging market context.