Back Matter

Back Matter

Author(s):
Carmen Reinhart, and Mohsin Khan
Published Date:
October 1995
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    Portfolio Capital Flows to the Developing Country Members of APEC

    Appendix Tables

    Table A1.Capital Flows to APEC Developing Countries by Country1(In billions of U.S. dollars)
    198219831984198519861987198819891990199119921993
    APEC developing countries27.914.310.014.38.22.3-4.16.926.651.943.389.4
    Asia17.815.811.017.310.70.63.25.013.029.823.657.6
    NIEs5.53.72.72.3-3.0-8.5-6.6-10.0-5.05.17.38.7
    Korea1.81.83.02.3-2.6-8.5-3.4-3.9-0.76.17.58.8
    Singapore1.80.80.81.01.22.63.01.72.31.92.93.3
    Taiwan Province of China1.81.1-1.1-1.0-1.6-2.6-6.3-7.8-6.6-2.8-3.1-3.4
    Other12.412.18.415.013.79.19.815.017.924.716.348.9
    China0.4-0.16.78.25.87.15.26.57.70.727.4
    Indonesia5.15.33.01.92.92.51.83.04.75.95.77.5
    Malaysia3.64.03.11.61.1-0.5-1.20.81.33.83.86.2
    Papua New Guinea0.50.30.20.10.10.20.20.30.20.30.20.1
    Philippines1.61.20.33.11.20.60.61.41.71.91.62.8
    Thailand1.21.31.81.60.10.61.34.33.65.14.24.9
    Chile1.7-1.3-0.7-1.7-2.6-0.9-2.10.10.80.50.81.5
    Mexico8.3-0.3-0.3-1.30.12.6-5.21.912.821.618.930.3
    Memorandum items:
    Developing countries62.138.036.623.79.0-3.7-6.01.012.657.152.7104.8
    Share of APEC developing countries in total private capital flows (in percent)44.937.527.260.390.868.590.882.185.3
    Sources: IMF, Balance of Payments Statistics Yearbook: and IMF staff estimates.

    Net medium- and long-term capital excluding exceptional financing and flows related with debt- and debt-service reduction operations. Brunei and Hong Kong are not included owing to the unavailability of data.

    Table A2.Net Foreign Direct Investment in APEC Developing Countries1(In billions of U.S. dollars)
    198219831984198519861987198819891990199119921993
    APEC developing countries5.64.44.54.26.08.28.58.412.119.123.439.5
    Asia3.63.84.13.64.86.16.94.58.914.018.734.1
    NIEs1.31.21.41.32.13.11.1-3.0-0.12.43.02.3
    Korea-0.1-0.10.10.20.30.40.70.5-0.1-0.2-0.5-0.5
    Singapore1.31.11.20.81.52.63.51.93.93.24.34.3
    Taiwan Province of China0.10.10.10.30.3-3.2-5.3-3.9-0.6-0.8-1.5
    Other2.32.72.72.32.73.15.87.59.011.615.831.8
    China0.40.51.11.01.41.72.32.62.73.57.223.1
    Indonesia0.20.30.20.30.30.40.60.71.11.51.82.0
    Malaysia1.41.30.80.70.50.40.71.72.34.04.54.3
    Papua New Guinea0.10.10.10.10.10.10.10.20.10.20.20.1
    Philippines0.10.10.30.90.60.50.50.20.8
    Thailand0.20.30.40.20.30.21.11.72.31.82.01.5
    Chile0.40.10.10.10.10.21.01.30.60.40.30.4
    Mexico1.70.50.40.51.21.80.62.62.54.84.44.9
    Memorandum items:
    Developing countries22.413.414.310.710.311.616.716.221.428.335.451.6
    Share of APEC developing
    countries in total foreign direct investment (in percent)25.233.231.938.958.570.350.951.756.467.766.276.5
    Sources: IMF, Balance of Payments Statistics Yearbook; and IMF staff estimates.

    Brunei and Hong Kong are not included owing to the unavailability of data.

    Table A3.Net Portfolio Flows to APEC Developing Countries1(In billions of U.S. dollars)
    198219831984198519861987198819891990199119921993
    APEC developing countries2.00.1-1.06.01.11.5-2.50.80.511.519.937.1
    Asia1.10.7-0.36.91.71.2-1.60.3-1.72.36.119.1
    NIEs0.10.20.11.1-0.2-0.2-2.5-1.0-1.11.95.010.8
    Korea0.20.31.00.3-0.1-0.50.83.15.710.7
    Singapore-0.20.2-0.50.3-0.3-0.1-0.9-1.2-1.2-0.1
    Taiwan Province of China0.1-0.10.1-0.4-1.7-0.9-1.00.40.2
    Other1.00.5-0.45.81.81.50.91.3-0.70.41.18.3
    China-0.6-1.63.01.61.10.9-0.2-0.20.2-0.13.0
    Indonesia0.30.40.3-0.1-0.1-0.2-0.10.1-0.1
    Malaysia0.60.71.11.90.1-0.4-0.1-0.30.20.41.5
    Philippines-0.30.1-0.2
    Thailand0.10.10.20.90.30.51.5-0.10.84.0
    Chile0.20.7-0.10.10.40.30.7
    Mexico0.9-0.7-0.8-1.0-0.8-0.4-0.90.41.89.113.417.2
    Memorandum items:
    Developing countries-7.57.914.213.93.13.63.7-1.02.216.833.255.0
    Share of APEC developing countries in total portfolio flows (in percent)0.743.234.443.121.168.559.867.4
    Sources: IMF, Balance of Payments Statistics Yearbook; and IMF staff estimates.

    Brunei and Hong Kong are not included owing to the unavailability of data.

    Table A4.International Bond Issues by APEC Developing Countries1(In millions of U.S. dollars)
    QIQIIQIIIQIVQIQII
    199019911992199319931994
    APEC developing countries3,8336,75512,13631,0724,4357,7695,26713,60110,5146,460
    Asia1,3562,7735,91619,8562,2303,3003,41610,9107,2075,070
    NIEs1,2762,2723,45311,8301,3281,3791,4607,6632,8961,774
    Hong Kong661001855,8876576924,5381,305550
    Korea1,1052,0123,2085,8646711,3437253,1251,273580
    Singapore10586
    Taiwan Province of China16060793643318558
    Other805012,4638,0269021,9211,9563,2474,3113,296
    China1151,3593,0474067511,2096811,500872
    Indonesia8036949448530455699750
    Malaysia954500454230735
    Philippines1,293170175190758154555
    Thailand176102,2472964955578991,728384
    Chile200120433333100
    Mexico2,4773,7826,10010,7832,2054,1361,8512,5913,3071,390
    Memorandum items:
    Share of APEC issues
    Asia35.441.148.763.950.342.564.980.268.578.5
    NIEs33.333.728.538.129.917.827.756.327.527.5
    Other2.17.420.325.820.324.737.123.941.051.0
    Mexico64.656.050.334.749.753.235.119.131.521.5
    Total bond issues by developing countries6,33512,83823,78059,43710,10912,11713,49223,71917,6688,443
    Share of APEC developing countries in total issuance by developing countries (in percent)60.552.651.052.343.964.139.057.359.576.5
    Sources: IMF staff estimates based on Euroweek, Financial Times, International Financing Review, Financial Market Trends, Financial Statistics Monthly, and data from the Organization for Economic Cooperation and Development.

    Including note issues under Euro medium-term note (EMTN) programs.

    Table A5.International Bond Issues by APEC Developing Countries by Type of Borrower(In millions of U.S. dollars)
    1990199119921993First Half

    1994
    APEC developing countries3,8336,75612,13631,07316,972
    Chile200120433
    China1151,3593,0482,371
    Hong Kong661001855,8871,855
    Indonesia803694934851,449
    Korea1,1052,0123,2085,8641,852
    Malaysia954965
    Mexico2,4773,7836,10110,7834,697
    Philippines1,293709
    Singapore10586
    Taiwan Province of China1606079876
    Thailand176102,2472,112
    Sovereign borrowers408207971,4272,012
    Chile200120
    China5821,823
    Mexico40620377352
    Philippines150
    Thailand300343189
    Other public sector2,6862,0294,78312,7525,158
    China1151,3592,443548
    Hong Kong102
    Indonesia80250179
    Korea7557051,7423,987437
    Malaysia954600
    Mexico1,8511,1921,4324,4013,240
    Philippines615154
    Thailand17250
    Private sector1,1073,9076,55816,8949,802
    Chile433
    China23
    Hong Kong1001855,7851,855
    Indonesia3692434851,270
    Korea3501,3071,4661,8771,415
    Malaysia365
    Mexico5861,9714,2926,0301,457
    Philippines528555
    Singapore10586
    Taiwan Province of China1606079876
    Thailand3101,6541,923
    Memorandum items:
    Share in total APEC issues
    (in percent)
    Sovereign issues012.16.54.611.9
    Other public issues70.130.039.441.030.4
    Private sector issues28.957.854.054.457.8
    Share of APEC issues in total developing country issues60.552.651.052.365.0
    Source: IMF staff estimates based on information from International Financing Review, Euroweek, and Financial Times.
    Table A6.Yield Spreads at Launch for Unenhanced Bond Issues by APEC Developing Countries1(In basis points)
    QIQIIQIIIQIVQIQII
    199019911992199319931994
    APEC developing countries397348214181210198167162129242
    Asia1071121129010712691244
    NIEs108941078386966779
    Other10513511895121190102274
    Chile and Mexico397348314288317293277263175227
    Sovereign borrowers18615213019794888998
    China8889889498
    Philippines320320
    Thailand10067577454
    Chile150150
    Mexico201215189208149
    Other public sector366273136122113120142117142153
    China11082576498108145
    Indonesia129158
    Korea89838286898167
    Malaysia9610091
    Philippines250310265217178250
    Thailand404338
    Mexico366247205192190182213187154126
    Private sector613533293258302290237222149306
    Hong Kong18011813383126115
    Indonesia410500405467
    Korea11687867690926869
    Philippines375375340
    Thailand4360587512794
    Chile194210170
    Mexico613533377358413347365331
    Memorandum items:
    All developing countries245346282259288274249243187259
    Sovereign borrower151261222230236248223223134180
    Other public sector250373232179199187200148177162
    Private sector650493376348424370339315256337
    Latin America
    (excluding Chile and Mexico)449455426400581481332371306360
    Source: IMF staff estimates based on information from International Financing Review, Euroweek, and Financial Times.

    Yield spread measured as the difference between the bond yield at issue and the prevailing yield for industrial country government bonds in the same currency and of comparable maturity. All figures are weighted averages.

    Table A7.Enhancements of International Bond Issues by APEC Developing Countries1
    1990199119921993First Half

    1994
    (In percent of total number of issues)
    Number of issues featuring enhancements
    APEC developing countries3640313459
    Convertible1032142548
    Secured194932
    Put option106171329
    Warrant31
    Asia2057384664
    NIEs2151385179
    Convertible2151214470
    Put option212036
    Warrant101
    Other86394045
    Convertible86303434
    Put option29301930
    Warrant
    Chile and Mexico4418241330
    Convertible42215
    Secured30918810
    Put option159825
    Warrant1
    All developing countries2733222548
    Convertible62071436
    Guaranteed21123
    Secured144733
    Put option69121122
    Warrant11
    (In percent of total funds raised)
    Value of enhanced bonds
    APEC developing countries4434302643
    Asia843183347
    NIEs935163862
    Other77212738
    Chile and Mexico6428411330
    All developing countries3131202143
    Asia739183550
    Europe11815
    Middle East and Africa10010090
    Western Hemisphere5934261223
    Source: IMF staff estimates based on information from International Financing Review, Euroweek, and Financial Times.

    Totals by region may be smaller than the sum of their components because some issues feature multiple enhancements.

    Table A8.International Bond Issues by APEC Developing Countries by Currency of Denomination
    1990199119921993First Half

    1994
    (In millions of U.S. dollars)
    U.S. dollars3,0584,9789,78425,65614,035
    Asia8351,6824,14316,1559,338
    NIEs7551,3472,84810,1332,899
    Other803351,2956,0226,439
    Chile and Mexico2,2243,2965,6429,5014,697
    Deutsche mark345299388174205
    Asia13596125205
    NIEs1359612525
    Other180
    Chile and Mexico210203263174
    Yen2597741,3063,4231,009
    Asia2597741,3063,0991,695
    NIEs2596593171,2621,035
    Other1159891,837660
    Chile and Mexico324
    Other currencies1707046591,8181,037
    Asia2213436021,037
    NIEs127170163434710
    Other51180168327
    Chile and Mexico434833161,216
    (In percent of total)
    Memorandum items:
    Share in total issues by APEC
    developing countries
    U.S. dollar8074818383
    Deutsche mark94311
    Yen712111110
    Other410566
    Share in total issues by
    developing countries
    U.S. dollar6168717481
    Deutsche mark2713883
    Yen711151310
    Other58556
    Share in total issues in
    global bond market
    U.S. dollar3230393637
    Deutsche mark8711137
    Yen1414131213
    Other4751413943
    Source: IMF staff estimates based on information from International Financing Review. Euroweek, and Financial Times.
    Table A9.International Equity Issues by APEC Developing Countries
    QIQIIQIIIQIVQIQII
    199019911992199319931994
    (In millions of U.S. dollars)
    APEC developing countries1,1384,6857,6328,0839301,0361,6444,4711,7951,472
    Asia1,0401,0114,4455,3196508271,1072,7341,1161,055
    NIEs2544652,2152,2774433932501,191292428
    Hong Kong1401,2501,26437425064072
    Korea4020015032828150150150209
    Singapore2141252726134117140170
    Taiwan Province of China5437272219
    Other7865462,2303,0422074348571,543824627
    China111,0491,908115343550900364247
    Indonesia6331672626047467263200342
    Malaysia382
    Philippines531593926444192
    Thailand1002091454661824424116380
    Chile9812927111494639671
    Mexico3,7643,0582,493280954431,674583346
    Memorandum items:
    Share of APEC issues
    Asia91.421.658.265.869.879.867.361.262.271.7
    NIEs22.39.929.028.247.642.315.226.616.329.1
    Other69.111.729.237.622.246.752.134.545.942.6
    Mexico78.440.130.830.19.237.432.523.528.3
    Chile8.61.73.411.05.71.45.34.8
    Total equity issues by developing countries1,2625,4369,25911,8651,0003,2002,3515,3123,8233,090
    Share of APEC developing
    countries in total
    issuance by developing
    countries (in percent)90.282.282.468.193.032.469.984.247.047.6
    Source: IMF staff estimates based on Euroweek, Financial Times, International Financing Review (IFR), and IFR Equibase.
    Table A10.International Equity Issues by APEC Developing Countries by Type(In billions of U.S. dollars)
    1990199119921993First Half

    1994
    APEC developing countries1,1384,6857,6328,0833,267
    ADR/GDR1993,6884,1853,3061,430
    Other1,0399973,4474,7771,837
    Asian countries1,0401,0114,4455,3192,171
    ADR/GDR112381,009677578
    Other1,0397733,4364,6421,593
    NIEs2544652,2152,277720
    ADR/GDR200693435578
    Other2542651,5221,842142
    Other7865462,2303,0421,451
    ADR/GDR1138316242
    Other7855081,9142,8001,451
    Chile and Mexico983,6743,1872,7641,096
    ADR/GDR1903,4493,1762,700852
    Other82251164244
    Memorandum items:
    All developing countries1,2625,4369,25911,8656,913
    ADR/GDR1994,0444,8956,4754,781
    Other1,1631,3924,3645,3902,132
    Source: IMF staff estimates based on information from Euroweek, Financial Times, and International Financing Review.

    European depository receipts are included in ADR/GDR.

    Table A11.Emerging Market Equity Funds Designated for APEC Developing Countries1(Net assets in billions of U.S. dollars)
    Net AssetsNumber of FundsNet AssetsNumber of FundsNet AssetsNumber of FundsNet AssetsNumber of FundsNet AssetsNumber of FundsNet AssetsNumber of Funds
    198819891990199119921993
    APEC developing countries2.7354.5625.31016.71199.219716.9231
    Asia2.4344.0584.4935.21107.318513.9219
    NIEs1.4141.8171.7222.2373.0725.992
    Korea1.0101.2131.2171.3241.7383.456
    Taiwan Province of China0.440.640.550.9130.9151.916
    Other1.0202.2412.7713.0734.71138.6127
    China2230.141.3343.248
    Indonesia10.370.5180.4180.4210.922
    Malaysia0.130.270.5170.6170.6231.021
    Philippines30.370.280.380.490.710
    Thailand0.8111.4181.4251.6261.9262.926
    Chile0.220.440.740.941.14
    Mexico0.310.320.540.851.081.98
    Memorandum items:
    Share of APEC developing countries in emerging market equity funds (in percent)46.438.545.443.739.944.934.941.032.342.424.040.3
    Total emerging market equity funds5.99110.014213.322519.229029.246572.5573
    Of which:
    Global funds0.9151.4182.3293.8397.87824.8108
    Asian funds4.4727.41129.217411.621116.531237.9372
    Of which: Regional1.8353.1504.0755.4928.011521.5130
    Latin American funds0.541.091.5163.5334.5649.178
    Of which: Regional0.220.451.5182.0405.253
    Sources: Emerging Market Funds Research, Inc; and Lipper Analytical Services, Inc.

    Excludes Hong Kong.

    Table A12.Net Equity Flows to APEC Developing Countries Through Emerging Market Mutual Funds1(In millions of U.S. dollars)
    19891990199119921993
    APEC developing countries-311,3661,0351,2401,518
    Asia51,1431,2061,1171,310
    NIEs837757791,0011,146
    Korea1604073523421,131
    Taiwan Province of China-7836842738890
    Other1971,46910783557
    China-1426401,016857
    Indonesia13228514630-35
    Malaysia/Singapore9233154-64-140
    Philippines131302-693-84
    Thailand-145525-64-150-540
    Chile118124-137-4
    Mexico-15499-158117213
    Memorandum items:
    Share of APEC developing countries in emerging market equity funds (in percent)21.141.213.710.3
    Total emerging market equity funds7846,4642,5118,17612,689
    Of which:
    Global funds-321,0764573,9086,372
    Asian funds6204,6321,7983,1135,023
    Of which: Regional3171,9768761,5773,075
    Latin American funds120652577381,403
    Of which: Regional1061852674461,320
    Sources: IMF staff estimates based on data from Emerging Market Funds Research, Inc.; and Upper Analytical Services, Inc.

    Excludes global funds and regional funds targeting Asia and Latin America: excludes Hong Kong.

    Table A13.International Bond Issues by Country and Sector, 1990–June 1994
    APEC Developing CountriesChileMexicoHong KongKoreaSingaporeTaiwan Province of ChinaChinaIndonesiaMalaysiaPhilippinesThailand
    (In millions of U.S. dollars)
    Financial sector28,26111,8891,6136,1731004,4651,4293792,214
    Banks22,97211,5886,1731002,0699293791,734
    Other5,2893011,6132,396500480
    Petroleum5,3333,92725095490112
    Real estate4,3631253,10822200769
    Utility3,7773502,422600405
    Cement3,2982,795111276524555
    Manufacturing2,1901,14055047030
    Steel2,1342201831,576154
    Telecommunications1,9821831,450100250
    Electrical1,8202351501,00738345
    Construction1,78486018534743230120
    Other115,8285704,8482,2931,5701915842,4281,1511356231,572
    Total70,77075327,8398,09314,0421911,1756,8932,8771,9192,0024,986
    (In percent of total)
    Financial sector39.942.719.944.08.564.849.718.944.4
    Banks32.541.644.08.530.032.318.934.8
    Other7.51.119.934.817.49.6
    Petroleum7.514.11.849.74.52.2
    Real estate6.20.438.40.810.015.4
    Utility5.31.317.231.320.2
    Cement4.710.00.10.95.58.52.7
    Manufacturing3.14.16.83.31.0
    Steel3.00.82.311.23.1
    Telecommunications2.824.35.20.712.5
    Electrical2.60.81.97.232.60.9
    Construction2.53.12.32.53.712.02.4
    Other122.475.717.428.311.2100.049.735.240.07.031.131.5
    Source: IMF staff estimates based on information from International Financing Review, Euroweek, and Financial Times.

    Includes sovereign issues.

    Table A14.International Equity Issues by Country and Sector, 1990–June 1994
    APEC Developing CountriesChileMexicoHong KongKoreaSingaporeTaiwan Province of ChinaChinaIndonesiaMalaysiaPhilippinesThailand
    (In millions of U.S. dollars)
    Telecommunications4,651983,159401251316426
    Financial sector3,339711,0921,60782932062749112
    Banks1,6527160359582200596
    Other1,6874891,012936274416
    Manufacturing2,7791,082491,460124559
    Electronics1,757737055401004810484994
    Media1,5161,516
    Steel1,2481113011240050986
    Transportation1,2172193642503033447
    Real estate79125010222772140
    Petroleum63140342249
    Cement461461
    Other6,5053122,6851631243093866661,36710445344
    Total24,89566510,2442,7251,0771,2948343,5792,0083826701,417
    (In percent of total)
    Telecommunications18.714.730.031.065.747.230.1
    Financial sector13.410.710.759.06.32.610.37.17.37.9
    Banks6.610.75.921.86.310.00.76.8
    Others6.84.837.12.60.37.16.61.1
    Manufacturing11.210.64.540.86.28.20.6
    Electronics7.111.025.950.17.75.82.94.214.80.3
    Media6.114.8
    Steel5.016.70.38.748.014.26.1
    Transportation4.92.133.819.38.55.13.3
    Real estate3.29.22.811.310.79.9
    Petroleum2.53.19.617.6
    Cement1.94.5
    Other26.146.926.26.011.523.946.318.668.127.26.724.3
    Source: IMF staff estimates based on information from International Financing Review, Euroweek, and Financial Times.
    Table A15.Net Purchases of Foreign Bonds by U.S. Investors(In billions of U.S. dollars)
    198819891990199119921993
    APEC countries-1.5-1.3-1.2-6.60.34.8
    Asia-1.6-1.2-1.1-6.9-1.3-1.4
    NIEs-1.2-1.1-1.2-6.2-0.5-2.4
    Hong Kong-0.8-0.8-0.3-4.1-0.9-1.9
    Korea-0.8-0.20.20.71.51.8
    Singapore0.4-0.1-0.6-0.40.50.2
    Taiwan Province of China-0.5-2.3-1.6-2.5
    Other-0.4-0.10.1-0.7-0.81.0
    China-0.10.1-0.2-0.4-0.40.2
    Indonesia0.4
    Malaysia-0.10.3-0.1-0.50.4
    Philippines-0.2-0.2-0.2-0.1
    Thailand-0.1-0.10.3
    Chile-0.1-0.2-0.7-0.1
    Mexico0.10.10.52.36.4
    Source: U.S. Department of the Treasury, Treasury Bulletin.
    Table A16.Net Purchases of Foreign Equities by U.S. Investors(In billions of U.S. dollars)
    198819891990199119921993
    APEC countries0.50.32.43.18.216.1
    Asia0.40.21.31.15.310.6
    NIEs0.20.21.10.94.68.9
    Hong Kong0.3-0.30.61.13.66.3
    Korea0.51.3
    Singapore0.40.5-0.20.51.2
    Taiwan Province of China0.1
    Other0.20.20.20.71.7
    China0.1
    Indonesia0.10.20.3
    Malaysia0.10.21.1
    Philippines0.20.1
    Thailand0.10.10.1
    Chile0.10.1-0.10.10.3
    Mexico1.12.12.85.2
    Source: U.S. Department of the Treasury, Treasury Bulletin.
    Table A17.Portfolio Flows from Japan to Southeast Asia and China1(In billions of U.S. dollars)
    198819891990199119921993
    Portfolio investment (net)-5.3-4.411.00.9-0.2
    Assets-0.2-0.50.2-0.9-1.1
    Liabilities-5.1-3.9-0.211.92.0-0.2
    Memorandum items:
    Medium- and long-term capital (net)-13.4-3.421.342.112.2-1.0
    Of which: Foreign direct investment (net)-3.2-5.5-5.5-3.2-2.4-2.1
    Japan’s current account surplus
    vis-à-vis Southeast Asia and China17.411.914.228.839.654.6
    Source: Japan, Ministry of Finance, Zaisei KinyuTokei Geppo (various issues).

    Southeast Asia comprises the Islamic State of Afghanistan, Bangladesh, Bhutan, Brunei, Hong Kong, India, Indonesia, Korea, Macao, Malaysia, Maldives, Myanmar, Nepal Pakistan, the Philippines, Singapore, Sri Lanka, Taiwan Province of China, and Thailand. A minus sign indicates net outflows from Japan.

    Table A18.Samurai Bond Issues by APEC Developing Countries(In millions of U.S. dollars)
    1990199119921993
    APEC developing countries2425861,1452,401
    China260829917
    Hong Kong69371
    Korea173290316719
    Malaysia450
    Mexico315
    Memorandum item:
    APEC developing countries
    (in billions of yen)3579145267
    Source: Japan, Ministry of Finance.

    Reflects a private placement.

    Table A19.Net Purchases of Equities in Asian Stock Exchanges by Japanese Investors(In millions of U.S. dollars)
    1992199319941
    Net PurchasesStockNet PurchasesStockNet PurchasesStock
    APEC developing countries-1171,8117382,8264632,938
    China11
    Hong Kong841,0334321,3801991,402
    Korea
    Singapore-156526369457713
    Indonesia-41191313719129
    Malaysia167255443190521
    Philippines212512
    Thailand-446533167-4170
    Source: Japan Securities Dealers Association.

    First seven months of 1994.

    Table A20.List of Developing Country Stock Exchanges Designated by the Japanese Securities Dealers Association
    Stock ExchangesDate of Designation
    APEC developing countries
    Hong Kong Stock ExchangeJune 1, 1977
    Kuala Lumpur Stock ExchangeJune 1, 1977
    Singapore Stock ExchangeJune 1, 1977
    Philippine Stock ExchangeJune 1, 1977
    Stock Exchange of ThailandDecember 14, 1987
    Jakarta Stock ExchangeDecember 26, 1989
    Mexican Stock ExchangeJune 28, 1990
    Shanghai Stock ExchangeMarch 10, 1994
    Shenzhen Stock ExchangeApril 20, 1994
    Non-APEC developing countries
    Buenos Aires Stock ExchangeJune 17, 1992
    Source: Japanese Securities Dealers Association.
    Table A21.Net Assets of Emerging Market Country Funds Listed on the Osaka Securities Exchange(In millions of U.S. dollars; end of period)
    Date

    Listed
    1992199319941
    Korea Fund12/91238491591
    Korea Equity Fund12/939386
    Morgan Stanley Asia
    Pacific Fund8/94751
    Singapore Fund12/9151118116
    Thai Capital Fund12/9172134125
    Total3618361,669
    Source: Japan, Ministry of Finance.

    At the end of August.

    For an analysis of these issues for several APEC countries see Section II, and Bercuson and Koenig (1993).

    Several APEC developing countries are currently experiencing financial sector problems. In Malaysia, nonperforming loans rose sharply after the onset of recession in 1985 and peaked at 32 percent of total bank loans in 1988; this ratio fell to 12 percent at end-1993. In Indonesia, nonperforming loans held by commercial banks increased significantly in the early 1990s, reaching 16 percent of outstanding loans; this ratio fell from 14 percent in June 1993 to 5 percent in March 1994. in part the result of a reduction in the value of loans at problem banks and because of growth in new loans. Nonperforming loans in Korea amounted to 6 percent of total bank loans in mid-1993. and in Mexico, nonperforming assets rose from 2 percent of bank loans in 1991 to 6 percent in September 1993. These asset quality data compare unfavorably to the asset quality in several industrial countries known to have had recent banking problems. Among the Nordic countries, nonperforming loans as a percent of total commercial bank loans peaked in 1992 at 9 percent in Finland. 7 percent in Norway, and 8 percent in Sweden. In the United States, delinquent loans reached 6 percent of commercial bank loans in 1991. In Japan, the official estimate of nonperforming loans among the 21 major banks was 3 percent at end-March 1993.

    The savings and loan crisis in the United States and the banking crises in the Nordic countries are recent examples of how bad credit decisions can weaken the banking system. The recent debt and asset price deflations in many industrial countries illustrate how the combination of expansionary macroeconomic policies, rapid financial liberalization. and an inadequate supervisory and regulatory framework can lead to costly problems. See International Monetary Fund (1993) and Sehinasi and Hargraves (1993).

    When the local bank lends funds to the importer, it simultaneously books a foreign currency loan and a foreign currency deposit to the importer. The local bank executes the transaction by drawing on its deposit in the foreign currency bank. At the end of the transaction, the local bank has a liability to the foreign currency bank and a foreign currency loan to the importer.

    If the local authorities permit residents to hold foreign currency deposits, the foreign currency deposit base can be expanded by the same process.

    For example, most of the bond portfolio inflows, which have dominated portfolio inflows into APEC developing countries in recent years, originated in the Euromarkets and are denominated in one of the major currencies. Thus, when nonresidents purchase Eurobonds issued by APEC borrowers, they transfer foreign currency deposits 10 APEC borrowers. If these borrowers hold their deposits in the local banking system, bond purchases have the same impact on the domestic financial system as a direct increase in domestic bank foreign liabilities.

    The need to limit the impact of capital inflows on the money supply is more pronounced for countries that operate fixed or managed exchange rate regimes, which is the case of many APEC developing countries.

    The effectiveness of reserve requirements depends on whether investors are able to circumvent them. In many industrial countries, investors can avoid reserve requirements by acquiring financial assets that are close substitutes for bank deposits, such as money market mutual funds, and thereby render sterilization ineffective. In most developing countries, however, close substitutes for bank deposits do not exist and so reserve requirements can often be used as an effective sterilization tool.

    Between 1991 and 1993, the cost of maintaining reserves at the central bank is estimated to have increased by about 23.5 percent, whereas the margin increased by 22.7 percent during this period.

    These restrictions were relaxed later in the year.

    In 1986, short-term money instruments (monetary stabilization bonds) were also introduced to manage liquidity. However, the central bank continues to impose high reserves ratios (11.5 percent) on demand and time deposits.

    In the case of Chile, the Quasi-fiscal costs associated with intervention policies are estimated to have been 1.4 percent of GDP; see Kiguel and Leiderman (1994).

    The government deposits held at the Bank of Thailand increased from 25 percent of total deposits in 1987 to 82 percent in mid-1992.

    In the Nordic countries, public funds (including deposit insurance funds) were expended during 1991–93 to resolve the banking crises. As a share of 1992 GDP, these public expenditures amounted to 8 percent in Finland, 4 percent in Norway, and 6 percent in Sweden. In 1992. the estimated total cost of resolving the U.S. savings and loan crisis and problems in the commercial banking industry was nearly 4 percent of GDP. The large capital flows in Chile in the late 1970s, combined with the full state guarantee to bank deposits and the ownership of banks by industrial or financial conglomerates to which cheap credit was granted, led to the banking crisis in 1982, after the economy was subject to external shocks. The cost of rescuing the banks over the period 1982–85 has been estimated at 44 percent of Chile’s 1985 GDP. See Fischer and Reisen (1992).

    In Korea, the main objective during the 1970s was to ensure funding for heavy industry. Since then, the emphasis has switched toward small and medium-sized enterprises. In Malaysia, the main objective has been to ensure access to credit by the Bumiputera population and by small-scale enterprises. In Indonesia, the Philippines, and Thailand, small-scale and agricultural borrowers were the target. These loans were often funded by the authorities directly (as in Korea through government funds allocated to the banks) or indirectly through central bank rediscounting. and usually carried interest rates well below those paid by other borrowers. In Korea, policy loans accounted for almost half of nationwide commercial bank loans through the 1970s and 1980s and even in 1990, almost ten years after these banks were privatized (see Nam (1993)). In some of the other countries, the aggregated policy lending requirements reached similar proportions of total commercial bank lending.

    A true picture of risk exposures can be obtained only from detailed audits of bank balance sheets.

    See Nasution (1993). Other examples are Korea and Taiwan Province of China, where the use of dummy accounts and borrowed names is widespread. In these circumstances, it is not possible to enforce restrictions against concentrations of lending to the bank shareholders.

    The Appendix contains summary descriptions of essential elements of commercial bank regulations drawn, in most cases, from published sources only. Errors and omissions may exist where relevant information is not readily available or, as in the case of Taiwan Province of China, where there is no official contact with the International Monetary Fund.

    In the United States, nonperforming loans include all loans that are at least 90 days overdue and all “substandard” and “loss” loans. In Japan, nonperforming loans are defined as loans to bankrupt borrowers and loans that are 180 days or more overdue.

    In the European Union, banks face a limit of 25 percent of capital on each of their large exposures—a transitional limit of 40 percent is applied in some cases—with the added condition that all exposures in excess of 10 percent of capital may not exceed eight times capital. In the United Slates, the large exposure limit is 15 percent of capital plus surplus, and in Japan the limit on exposures of ordinary banks to single borrowers and their subsidiaries is 40 percent of equity.

    See Feldman and Kumar (1994) for a discussion of the potential contributions equity markets can make to growth in developing countries.

    In addition, as Table 4-3 highlights, volatility in emerging markets, as measured by the standard deviation of stock returns, remains very high by industrial country standards. For the period January 1992 to July 1994, daily stock returns in these emerging markets were twice as variable as stock returns in the United States.

    The increase in volatility spillover in Mexico, when portfolio flows became volatile, is statistically significant at the 1 percent level (see Table 4-4). The subsequent drop in spillover, when portfolio flows became less volatile, is also highly significant. In Thailand, there was a significant drop in volatility spillovers when portfolio flows became less volatile.

    The increased volatility in Hong Kong may have been related to sudden reversals of investor sentiment about the prospects for investment in China.

    This is also true for Chile, another country that has been experiencing a surge in capital flows and a stock market boom; see Reinhart and Reinhart (1994).

    The experience of several Latin American countries during the late 1970s and early 1980s provides some basis for those concerns. In several countries, including Chile and Mexico, the surge in inflows was accompanied by booming equity and real estate prices; the abrupt reversal of those flows in the early 1980s eroded the earlier price gains and. in most instances, left stock prices well below their pre-boom levels; see Calvo, Leiderman, and Reinhart (1994). The impact of this reversal on financial markets and on the banking sector was substantial and is shown to have played a key role in spawning the banking crises that followed; see Rojas-Suárez and Weisbrod (1994). Similar, if less acute, adverse effects on the banking sector are also evident in industrial countries; see Schinasi and Hargraves (1993).

    The only relevant (but minor) constraint in Hong Kong is the financial resources rule in the Securities Ordinances in which a broker’s secured receivables may be counted as liquid assets only to the extent of the market value of the securities held as collateral. Generally, brokers operating in Hong Kong impose their own restrictions. The common initial margin level is 50 percent of the value of the collateral. Hong Kong also allows short selling as of January 1994, but only for some of the component stocks of the Hang Seng index. For borrowing of more than 14 days, a 15-basis point stamp duty is levied on both the borrower and the lender on top of the transaction stamp duty.

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