From the Pacific Exchange Blog
Pakistan’s recent MSCI upgrade highlights one path for frontier financial market development. While stock index categorization may serve to legitimize a market and bestow prestige, it is not necessarily the best indicator for investor sentiment. Global investors consider a broad range of indicators in considering where to deploy their capital. For frontier and emerging markets conducting financial market reform, the challenge is more complex than an index upgrade might imply.
A more volatile exchange rate and dampened growth expectations for the Chinese economy have halted, and in some cases led to reversals in, the renminbi’s path towards becoming an international currency.
A half-year into the Bank of Japan’s experiment with negative interest rates, there are growing signs of unusual market activity in Japan, with yields on even long-term government debt going negative and ever-increasing overseas investment. Amid a breakdown in longstanding financial relationships that previously allowed international investors to hedge currency risk cost effectively, Japanese investors are increasingly funding their overseas portfolios with foreign currency debt to minimize foreign exchange risk.
This Asia Focus outlines the history of financial and banking reforms in Taiwan, analyzes problems that developed in the banking sector after liberalization, and evaluates current initiatives by regulators to address those problems.