Copyright
© 1994 International Monetary Fund
ISBN 9781451942118
ISSN 0258-7440
Price: US$20.00
(US$12.00 to full-time faculty members and students at universities and colleges)
Please send orders to:
International Monetary Fund, Publication Services
700 19th Street, N.W., Washington, D.C. 20431, U.S.A.
Tel.: (202) 623-7430 Telefax: (202) 623-7201
recycled paper
Contents
Preface
List of Abbreviations
I. Introduction
II. Bond Market Turbulence and the Role of Hedge Funds
Factors Underlying the Turbulence
Role of Hedge Funds
III. Derivatives and Supervisory Issues
Derivatives: Recent Supervisory and Regulatory Initiatives
Role of the Central Bank in Banking Supervision
Supervision of Nonbanks
IV. Developing Country Finance Issues
Broad Trends
Pricing and Assessment of Risk
V. Government Securities Markets in Industrial Countries
Internationalization and Institutionalization
Reform of Government Securities Markets
VI. China’s Emerging Capital Markets
VII. Conclusions
Annexes
I. Government Securities Markets
Recent Trends and Developments
Market Structure
Administration and Supervision
II. Developments in the Regulation of International Banking
Growth of the OTC Derivatives Markets
Strengthening Capital Requirements
III. Developments in International Financial Markets
International Bond Market Developments in 1993
International Equity Market Developments
International Banking Activity
Banking Developments in Three Nordic Countries and in Japan
IV. Developments in Private Market Financing for Developing Countries
Recent Experience
Issues in Market Access
Assessment and Pricing of Risk
V. Role of Capital Markets in Financing Chinese Enterprises
Development of Securities Markets in China
Recent Developments in External Financing
The Chinese Approach to Securities Market Development
Statistical Appendix
References
Boxes
Section
III.
1. Futures Shocks
2. Developments in Mutual Fund Investments
V.
3. Withholding Taxes and Government Borrowing
Annex
III.
4. New Episodes of Stress in Banking Systems
Tables
Section
II.
1. Developments in Financial Markets of Selected Industrial Countries
2. Government Bond Yield Correlations
3. Comparative Returns: Hedge Funds Versus Other Investments
Annex
I.
4. Central Government Debt Outstanding
5. Gross Issues of Medium- and Long-Term Government Securities
6. Gross Issues of Short-Term Government Securities
7. Holders of Central Government Debt in Selected Industrial Countries
8. Remaining Maturity of Domestic Currency Debt
9. Techniques for Issuing Domestic Government Securities in Major Industrial Countries
10. Transaction Volume in Government Securities Market
III.
11. Developments in International Bond Markets
12. Sources of International Capital Markets Financing
13. Net Cross-Border Equity Flows
14. Changes in Banks’ Cross-Border Claims and Liabilities
15. Nordic Countries: Performance of Major Banks
16. Japan: Indicators of Banking Performance
17. Business Results of the Cooperative Credit Purchasing Company (CCPC)
IV.
18. International Equity Issues by Developing Countries: Depository Receipts and Other Issues
19. Bank Credit Commitments by Country or Region of Destination
20. Total Return on Equity in Selected Emerging Markets
V.
21. Issues of Securities in China
22. Transactions in Debt Securities in China
23. Chinese H Shares
Statistical Appendix
A1. United States: Estimated Ownership of Public Debt Securities by Private Investors
A2. Financial Futures and Options: Exchanges, Contracts, and Volume of Contracts Traded
A3. Markets for Selected Derivative Financial Instruments: Notional Principal Amounts Outstanding
A4. Annual Turnover in Derivative Financial Instruments Traded on Organized Exchanges Worldwide
A5. Notional Principal Value of Outstanding Interest Rate and Currency Swaps
A6. New Interest Rate Swaps and Currency Swaps
A7. Currency Composition of Notional Principal Value of Outstanding Interest Rate and Currency Swaps
A8. Changes in Claims on Nonbanks and Liabilities to Nonbanks
A9. Changes in Interbank Claims and Liabilities
A10. International Bond Issues by Developing Countries and Regions
A11. International Equity Issues by Developing Countries and Regions
A12. Comparative Valuations Across Emerging Markets
A13. Restrictions on Outward Portfolio Investment of Institutional Investors in Five Major Industrial Countries
A14. Issues of Closed-End Funds Targeting Emerging Markets in Developing Countries and Regions
A15. Details of Treasury Note Issues in China
A16. Bonds Issued by China
Charts
Section
II.
1. Yields on Financial Times Benchmark Government Bonds, January 1993–March 1994
Annex
I.
2. Government Debt Outstanding in Major Industrial Countries
3. Gross Issues of Medium- and Long-Term Government Securities in Major Industrial Countries
4. Gross Issues of Short-Term Government Securities in Major Industrial Countries
III.
5. Long-Term Government Bond Yield for Seven Major Industrial Countries, January 1990–March 1994
6. Major Industrial Countries: Changes in Stock Market Indices, January 1990–May 1994
7. Major Industrial Countries: Yield Differentials, January 1990–April 1994
IV.
8. Share Price Indices for Selected Emerging Markets
9. Yield Spreads at Launch for Selected Developing Countries
V.
10. Selected Stock Exchange Indices in China and Hong Kong, 1993–February 1994
The following symbols have been used throughout this paper:
… to indicate that data not available;
— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
– between years or months (e.g., 1991–92 or January–June) to indicate the years or months covered, including the beginning and ending years or months;
/ between years (e.g., 1991/92) to indicate a crop or fiscal (financial) year.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice. The term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.
Preface
This report was prepared under the direction of Morris Goldstein, Deputy Director of the Research Department of the International Monetary Fund, together with David Folkerts-Landau, Chief of the Capital Markets and Financial Studies Division of the Research Department. The co-authors of the report are Liliana Rojas-Suárez, John Montgomery, Victor Ng, and Michael Spencer of the Research Department, and Robert Rennhack and Paul Mylonas of the Policy Development and Review Department.
This report was prepared in connection with the annual surveillance of international capital markets conducted by the International Monetary Fund. It draws, in part, on a series of informal discussions with commercial and investment banks, securities houses, stock and futures exchanges, regulatory and monetary authorities, and the staffs of the Bank for International Settlements, the Commission of the European Communities, the European Bank for Reconstruction and Development, the International Swaps and Derivatives Association, the Japan Center for International Finance, and the Organization for Economic Cooperation and Development. These discussions took place in Belgium, Canada, the People’s Republic of China, France, Germany, Hong Kong, Ireland, Italy, Japan, New Zealand, Sweden, the United Kingdom, and the United States, between October 1993 and March 1994.
Subramanian S. Sriram provided extensive research and editorial support and, together with Kellett W. Hannah, prepared the data presented in the report. Norma Alvarado and Janet Shelley provided expert word processing assistance. Esha Ray of the External Relations Department edited the manuscript and coordinated the production of the publication.
The study has benefited from comments by staff in other departments of the Fund and by members of the Executive Board. Opinions expressed, however, are those of the authors and do not necessarily represent the views of the Fund or of the Executive Directors.
List of Abbreviations
| ADRs | American Depository Receipts |
| AIL | Approved Issuer Levy |
| BIS | Bank for International Settlements |
| BOC | Bank of China |
| BSA | Bank Support Authority (Sweden) |
| BTANs | Bons du Trésor à taux annuel (France) |
| BTFs | Bons du Trésor à taux fixe (France) |
| CAD | Capital Adequacy Directive |
| CBOE | Chicago Board Options Exchange |
| CBOT | Chicago Board of Trade |
| CCPC | Cooperative Credit Purchasing Company (Japan) |
| CFTC | Commodity Futures Trading Commission (United States) |
| CHAPS | Clearing House Association Payments System (United Kingdom) |
| CHIPS | Clearing House Interbank Payments System (United States) |
| CITIC | China International Trust and Investment Corporation |
| CME | Chicago Mercantile Exchange |
| CSRC | China Securities Regulatory Commission (China) |
| DCH | derivatives clearing house |
| DITIC | Dalien International Trust and Investment Corporation |
| DMO | Debt Management Office (New Zealand) |
| DTB | Deutsche Terminbörse (Germany) |
| EC | European Community (former name of European Union) |
| ECP | Euro-commercial paper |
| ECU | European currency unit |
| EMTN | European medium-term note |
| ERM | (European) exchange rate mechanism |
| EU | European Union |
| FAS | Financial Accounting Standard |
| FASB | Financial Accounting Standards Board (United States) |
| FDIC | Federal Deposit Insurance Corporation (United States) |
| FRN | floating rate note |
| GDP | gross domestic product |
| GDRs | Global Depository Receipts |
| GEMMs | gilt-edged market makers (United Kingdom) |
| GGF | Government Guarantee Fund (Finland) |
| GITIC | Guangdong International Trust and Investment Corporation |
| GNP | gross national product |
| GSCC | Government Securities Clearing Corporation (United States) |
| ICBC | Industrial and Commercial Bank of China (China) |
| IFC | International Finance Corporation |
| ISDA | International Swaps and Derivatives Association |
| ITIC | International Trust and Investment Corporation (China) |
| JGB | Japanese Government bond (Japan) |
| KOP | Kansallis-Osake-Pankki (Finland) |
| LIBOR | London interbank offered rate |
| LIFFE | London International Financial Futures Exchange |
| MATIF | Marché à Terme International de France |
| MMI | Major Market Index |
| MTS | Mercato Telematico Secondario (Italy) |
| NAFTA | North American Free Trade Agreement |
| NASDAQ | National Association of Securities Dealers’ Automated Quotations (United States) |
| NETS | National Electronic Trading System (China) |
| NTMA | National Treasury Management Agency (Ireland) |
| Nymex | New York Mercantile Exchange |
| NYSE | New York Stock Exchange |
| OATs | Obligations Assimilables du Trésor (France) |
| OCC | Office of the Comptroller of the Currency (United States) |
| OECD | Organization for Economic Cooperation and Development |
| OFD | Own Funds Directive |
| OTC | over the counter |
| OTS | Office of Thrift Supervision (United States) |
| PBOC | People’s Bank of China |
| PCBC | People’s Construction Bank of China |
| QIBs | qualified institutional buyers |
| RTGS | real time gross settlement |
| S&P | Standard and Poor’s |
| SAEC | State Administration of Exchange Control (China) |
| SCRES | State Council for the Reform of the Economic System (China) |
| SCSPC | State Council Securities Policy Committee (China) |
| SDB | Shenzhen Development Bank (China) |
| SEB | Skandinaviska Enskilda Banken (Sweden) |
| SEC | Securities and Exchange Commission (United States) |
| SEHK | Stock Exchange of Hong Kong |
| SFA | Securities and Futures Authority (United Kingdom) |
| SIB | Securities and Investment Board (United Kingdom) |
| SITCO | Shanghai Investment and Trust Corporation (former name of SITICO) |
| SITIC | Shangdong International Trust and Investment Corporation |
| SITICO | Shanghai International Trust and Investment Corporation |
| SRD | Solvency Ratio Directive |
| SSE | Shanghai Stock Exchange (formerly Shanghai Securities Exchange) |
| STAQS | Securities Trading Automated Quotation System (China) |
| SURFs | step-up recovery floaters |
| SVTs | Spécialistes en Valeurs du Trésor (France) |
| TITIC | Tianjian International Trust and Investment Corporation |