The Research On Emerging Countries’ Foreign Exchange Reserves And Their Risks And Returns

The issue of foreign exchange reserve has been a hot issue of internationalfinance, while emerging market countries’ foreign exchange reserves is moreconcerned by countries all over the world. In this paper, methods of normativeanalysis and empirical analysis, qualitative analysis and quantitative analysis are usedto analysis the foreign exchange reserves, revenue return and risk of the19emergingmarket countries in Asia, Europe, America, Middle East and Africa in the global scope.Emerging market countries must learn how to hold foreign exchange reserves, reservecurrency and reserve assets reasonably, to choose appropriate proportion, to controlthe risk and to improve the reserve investment income according to the actualsituation of countries. This is of great significance for emerging market countries topreserve and increase the value of foreign exchange reserves.This paper believes that, the scale of foreign exchange reserve amount inemerging market countries is huge—78.6%of global foreign exchange reserves,followed by the European economies, Latin American economies and Middle Eastand Africa economies, which accounted for7.74%,7.57%and2.81%respectively.Specific to the country, China—Asia’s emerging economies，got the largest foreignexchange reserves to$3311590000000in2012, accounting for about70%of Asia and42%of global foreign exchange reserves. The top ten emerging market countries offoreign exchange reserve: China, Russia, Brazil, Korea, Singapore, India, Thailand,Mexico, Malaysia and Indonesia. In the structure of foreign exchange reserve, the fourkinds of reserve currency (dollar, euro, yen, pound) are common. Among the fourkinds of common reserve currency, the dollar is still many emerging market countries’best choice. However, with the changes in the international economic power, the euroas a reserve currency raise sharply. In the income and the risk of foreign exchangereserves, the value was effected by interest rate, exchange rate, policy andinternational capital flows and so on many aspects. Meanwhile, the empiricalevidence shows that in Asia and Europe, the country’s foreign exchange reserves riskloss rate is about10%~25%; Latin America, the Middle East and Africa emergingmarket countries the foreign exchange reserves risk loss rate above25%; while theforeign exchange reserves in Asian and European economies is generally higher thanin Latin America, the Middle East economies. Therefore, the emerging marketcountries with large foreign exchange reserves face less risk loss rate. In the same external conditions, these countries in the face of risk have more selective andcontrollable.Finally, some relevant policy suggestions are put to the emerging marketcountries. The conclusion is that, the states should hold foreign exchange reserves astheir own situation, at the same time to adjust foreign exchange reserve assets, tochange the dollar as a only big situation, and to choose their exchange rate policy,toincrease overseas equity investment, enhancing the ability to deal with overseasinvestment, international strategic challenges.