Research On The Stock Market Linkage Between China And ASEAN-5

The wave of global economic integration and financial integration has strengthened the economic ties of all countries in the world.The communication between the global capital markets is more and more frequent.The interaction between one country's stock market and other countries' stock markets has been amplified.With the 30-year history of stock market development,Chinese stock market continues to grow and progress,and its linkage with the world's stock market is significantly enhanced.The Asian financial crisis in 1997 and the U.S.subprime crisis in 2008 have brought great damage to the world's stock market,leading to the spread of financial risks in the global scope.Such financial risks pose a challenge to the international development of Chinese stock market.Since the official launch of China-ASEAN Free Trade Area on January 1,2010,the volume of import and export trade and direct investment between China and ASEAN countries has been increasing year by year,and economic exchanges have become increasingly frequent.Under the background of regional integration and RMB internationalization,the stock market linkage between China and ASEAN countries,including Philippines,Malaysia,Thailand,Singapore,Indonesia,is increasing.China and the ASEAN-5 have similar situations in geographical location and economic background.Studying the stock market linkage between China and the ASEAN-5 is conducive to preventing financial risks and achieving stable and healthy development of Chinese stock market.The research goal of this paper is to maximize the benefits of stock market linkage and reduce the risk of stock market linkage based on the identification of the stock market linkage between China and ASEAN-5.This paper focuses on the following issues: firstly,whether there is linkage between Chinese stock market and ASEAN's stock market;secondly,if there is linkage,what is its size,direction and sustainability;thirdly,whether the linkage of stock market is affected by major financial events;then,explain these characteristics of the linkage with economic laws;finally,based on the discussion of linkage,discuss the relationship between Chinese stock market and ASEAN-5's stock market to avoid financial risks and provide suggestions to ensure the stable,orderly and healthy development of Chinese capital market.Based on the above problem orientation,this paper uses the sample data of stock index of China and ASEAN five countries,including Manila composite index,FTSE Kuala Lumpur composite index,Thailand composite index,FTSE Singapore STI index,Jakarta composite index and Shanghai Composite Index,taking the closing price of the index from December 31,2009 to December 1,2019,and calculating the logarithmic returns of the index.The VAR model and GARCH model are established to study the linkage of mean spillover and volatility spillover.Based on the empirical analysis of stock market linkage based on mean spillover,we can draw the following conclusions: firstly,using Granger causality test and variance decomposition,we find that the stock market linkage between China and ASEAN-5 is quite different,among which,the stock market linkage between China and Singapore and Malaysia is relatively strong,while that between China and Philippines,Thailand and Indonesia is relatively weak;secondly,using impulse The response we find that after a pulse was given to China,the impact on other countries is weakly from negative to positive,indicating that although the influence of Chinese stock market had improved,it was still limited.Based on the empirical analysis of volatility spillover,we can draw the following conclusions: firstly,using GARCH(1,1),we find that there is a dynamic correlation between China and ASEAN-5' stock market.Secondly,DCCGARCH is used to visualize the time-varying correlation coefficient,and it is found that the dynamic linkage trend of the stock market between China and ASEAN-5 is increasing,and the key events will have a great impact on the linkage of the stock market.These key events include the official launch of China-ASEAN Free Trade Area in 2010,Chinese "stock disaster" in 2015,and Chinese stock market suffering from Sino US trade friction in 2019.In the end,it puts forward some suggestions.For policy makers,they should strengthen the cooperation of stock market in the region,gradually promote the opening of capital market,establish a "firewall" mechanism,and prevent from the contagion effect of extreme financial events.For investors,they should reasonably arrange their asset allocation and get more professional knowledge learning by themselves.