Research On Segmentation Between Domestic And Foreign Security Markets

As the economic globalization and wide utilization of information technology in financial markets, financial trading location becomes ambiguous and capital can flow worldwide. At the same time, financial innovations come into being widely. The market segmentation is decreasing between different countries. In other words, markets are becoming more and more integrated. Financial markets integration includes money market, bond market and security market. The Mexico, East Asia and Russia financial crisis had a great influence on the opening process in the emerging markets. But the financial integration process between developing countries and developed countries hasn't change in general. As a developing country, the openness of Chinese capital market is accelerating. The foreign listing, QFII, QDII and the entering of foreign financial institution promote the integration of domestic and foreign capital market. According to the statistic of China Security Regulatory Commission, up to Jan 2001, there are more than 120 domestic firms listing in foreign markets including Hongkong, USA, London and Singapore since Tsingtao listing in Hong Kong in 1993. The scale of QFII is increasing since its implement in May, 2003. About 33 foreign institutions have got QFII qualification until the end of 2005. How to measure the segmentation of domestic and foreign markets? What is the cause of market segmentation? What influence will capital market openness have on domestic security market? Understanding these questions will help to make policies of capital market openness.Market segmentation is a focus of financial research in recent years. It includes the measurement of market segmentation, the cause of market segmentation, how to achieve market integration, the financial and real effects of market integration. This paper will examine Chinese security market segmentation. It involves market segmentation and the price difference between A- and H- shares, the measurement of market segmentation, market segmentation and price reaction to cross-listing, foreign listing and its influence on domestic security market. The main work and conclusion...