The Relational Research Between The International Hot Money And Stock Market In Our Country

Hot money mainly refers to the kind of short-term capital flows, which pursues short-term speculation profit for the purpose and flows rapidly to quest for the space or time spreads in the international financial markets International hot money is highly sensitive, covert, uncontrollable and speculatively destructive. When one country’s asset prices rise, hot money take advantage of the defects of the financial system or regulatory to inflow the country stealthily to make waves and blow big bubbles. And when the asset price bubbles begin to break down, the international hot money quickly escapes on a large scale, and spur the slump in asset prices. In this process, hot money get rich rewards, but the attacked country may causes significant economic loss or even financial crisis. The decades development achievements are likely be destroyed by a fatal attack of hot money, and the harm of international hot money is obvious.Along with the increase of world trade and the development of modern communication technology, the global economy’s contact is close increasingly. Under the background of economic globalization and financial liberalization, hot money’s flows become more and more frequently in the world. The rapid development of modern information technology and the innovative apply of various financial derivatives make hot money have more flexible and diversified means to flow and speculate in the international financial markets. This also makes it more and more difficult to monitor international hot money by a single country’s own ability. In recent years, the international situation is complex relatively. The domestic economic situation and the whole international economic environment have sharp contrast:international economic situation is unrest, for example economy growth of American, Europe and Japan are all weak, but our country maintains good economic development trend. The contrast of domestic and international economic situation makes the possibility increases that international hot money inflow to speculate. The contrast of uncertainty and complexity of the whole international environment and the domestic political stability, good economy and rises of asset prices make China has enough appear to hot money, which prompted international hot money inflows to arbitrage through various channels and means.This paper take the massive inflow of international hot money as research object and starting point to probe into hot money’s characteristics and source, and the relationship between hot money and Chinese stock market etc. International hot money has high sensitivity, high mobility and uncontrollability, high virtuality and speculativeness, high profit and risk, which makes it significant impact to one country’s economic usually. And these hot money mainly derive from the following aspects:First, it comes from the international social capital; Second, it derives from investment funds, hedge funds and so on. Then the money of commercial Banks and investment Banks also comes into being hot money. In addition, one part of hot money comes from international dirty money.After we understand the characteristics and source of international hot money and so on, this paper reviews some famous cases that international hot money attack the emerging countries’ financial markets and draw some lessons, which provides warnings to our country guarding against hot money. From the several cases, we can see that although time, place and national conditions are different, but the role of hot money is similar in the process of financial crisis which has great significance for us to guarding against hot money’s attack.Then this paper analyzes the inflow reasons and possible channels of international hot money emphatically, and compare the measuring methods of related literature to international hot money, so as to select a relatively effective and realistic methods to measure the general scale of domestic hot money in recent years. And then this paper analyzes the influence of hot money’s large scale inflow to our capital market especially stock market. Finally this paper begins to make empirical tests, and analyzes the interrelation between hot money and our stock market though bivariate GARCH model. Based on the empirical tests, this paper proposes some suggestions against hot money’s attack to our stock market.With respect to the study thoughts and methods, this paper uses the quantitative empirical test method to analyze the relationship between international hot money and our stock market based on comparing previous literature. First, this paper compares two different measuring methods and selected the more realistic methods eventually:Hot Money = Foreign Exchange Reserves’ Accrual-FDI-Trade Surplus. Then after estimating the inflows’scale of international hot money, this paper make empirical test to analyze the relationship between hot money and our stock market though bivariate GARCH model, and draw the conclusion that they have ARCH effect, GARCH effect and obvious fluctuation spillover effect ultimately.Based on the above analysis, this paper propose some suggestion against the hot money’s large scale inflow and rational guidance. First, monitoring the inflow channels of international hot money strictly. Second, eliminating domestic motive of hot money’s inflow gradually. Third, adjusting our unreasonable economic structures. Fourth, establishing a reasonable policy to guide foreign investment to the orientation of the planning adjustment of industrial structure, such as the central region, west area and new & high-tech industries projects. Finally, strengthening cooperation with international community. Though the joint action with governments around the world to safeguard the international financial stability and maintain steady economic growth in the world.