CORPFIN 7105 - Asian Capital Markets (M)

North Terrace Campus - Semester 1 - 2014

This course provides an overview of current Asian capital markets. The growth of Asian economies has been spectacular in the past 60 years; the advancement of Japan from the 1950s until the beginning of 1990s, the emerging Asian Tigers (Hong Kong, Korea, Singapore, Taiwan) in the 1980s, and the rapid transformation and growth of China and India since the 1990s. Asian capital markets are quite diverse as they consist of emerging markets at different stages of development as well as mature markets. Therefore, it is not easy to view Asian capital markets through a single lens. However, this course not only introduces students to capital markets in various Asian countries but also attempts at introducing a unified conceptual framework to understand markets in these countries. The framework focuses on institutional environments (such as legal systems) in different countries and their impacts on corporate behaviours. We also present empirical evidence that such a framework might not necessarily explain the recent developments in China and India. Two of the important features in Asian capital markets, which contrast those of capital markets in UK-US, are the roles played by the State and closely tied families, which we will discuss in detail. The globalization of the world economy in the past two decades has affected the developments of Asian capital markets. Although our course may discuss the development of capital markets of individual countries, we will discuss Asian economies in the global context and will explore the increasing weight of Asia in the world economy.

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Course Details

Course Code	CORPFIN 7105
Course	Asian Capital Markets (M)
Coordinating Unit	Adelaide Business School
Term	Semester 1
Level	Postgraduate Coursework
Location/s	North Terrace Campus
Units	3
Prerequisites	CORPFIN 7005
Assessment	Exam/assignments/tests/tutorial work as prescribed at first lecture

Course Staff

Course Coordinator: Associate Professor Takeshi Yamada

Course Timetable

The full timetable of all activities for this course can be accessed from Course Planner.

Proposed Class Schedule
1. 03/03. Asia’s economy and global imbalance
Asia’s economic growth
Global imbalance and its cause

2. 10/03. Asia’s currency issue
Bretton Woods System II
Capital controls and liberalization
Road to convertibility: Chinese Yuan

3. 17/03. Asia’s financial markets
Asian markets in the global portfolio: Equity and bond markets
Currency market
Can Asia embrace global financial centres?
China’s segmented equity market

4. 24/03. Law and finance: A framework for understanding stakeholders and governance
Textbook finance vs. reality
Law and finance

5. 07/04. Law and finance: Global and Asian evidence
Who controls Asian firms?
Shareholder rights: cash-flow rights and voting rights
Ownership concentration
External finance

6. 28/04. State capitalism Part 1: Asia’s growing sovereign economic power
State capitalism
State owned enterprises (SOEs) and privatization
Market incentives and state objectives
Government control of partially privatized SOEs
The impact of state on market and firms

7. 05/05. State capitalism Part 2:
China’s growth puzzle

8. 05/05. Family capitalism
Family control around the world
Growth of family business in Asia
Is family business a good organizational structure?
US example: diversified ownership and good legal environment
Asian firms: concentration of control and expropriation

12/05 NO LECTURE: Students are expected to work on the project.

9. 19/05. Informal financial sector and South Asia (India)
India’s development and financial markets
Page 7 of 11
Financing Indian corporate firms
Corporate groups and informal financing
Microfinance

10. 26/05. Corporate groups
Korea: Chaebol
Tunneling
Japan: Keiretsu
Main bank system
Cross-shareholding

02/06 DEADLINE FOR PROJECT

11. 02/06. Global Financial Crisis and lessons from the Japanese Financial Crisis of the 1990s
The Japanese asset price bubble in the 1990s
Bank crisis
De-levering of firms and recession

12. 09/06. Wrap up and left over topics:
Tale of two cities: Hong Kong and Singapore
Wrap up

Course Learning Outcomes

1. Overview of Asian economies and currency system
2. Conceptual framework for understanding financial markets and institutions.
3. Understanding of empirical findings for various Asian capital markets
4. Vision for the future of Asian capital markets

University Graduate Attributes

This course will provide students with an opportunity to develop the Graduate Attribute(s) specified below:

University Graduate Attribute	Course Learning Outcome(s)
Knowledge and understanding of the content and techniques of a chosen discipline at advanced levels that are internationally recognised.	1 to 4
The ability to locate, analyse, evaluate and synthesise information from a wide variety of sources in a planned and timely manner.	1 to 4
An ability to apply effective, creative and innovative solutions, both independently and cooperatively, to current and future problems.	1 to 4
A proficiency in the appropriate use of contemporary technologies.	3
A commitment to continuous learning and the capacity to maintain intellectual curiosity throughout life.	1 to 4
An awareness of ethical, social and cultural issues within a global context and their importance in the exercise of professional skills and responsibilities.	1 to 4

Learning Resources

Required Resources

There is no text book for this course. Please read the required readings prior to attending the lecture. There are on average two required readings for each lecture. You should be able to download all the journal articles from the library or from the web directly using the provided link. Other articles will be uploaded on MyUni.

Please download articles directly if a link is provided below. For journal articles, you can download from the university library, or some will be uploaded onto MyUni.
(*) Must read the ones with the asterisk
(ref) Reference readings

1. Global imbalance and Asia’s economy
a. (*)Charles Adams and Donghyun Park, 2009. Causes and Consequences of Global Imbalances: Perspective from Developing Asia. Asian Development Review, vol. 26, no. 1: 19−47. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1611424

b. (*)Martin S. Feldstein, 2008. Resolving the Global Imbalance: The Dollar and the U.S. Savings Rate.
Journal of Economic Perspectives, vol. 22(3), pages 113-25, Summer. http://www.nber.org/papers/w13952

c. (ref) Guonan Ma and Wang Yi, 2010. China’s High Saving Rate: Myth and Reality. BIS Working Paper No. 312 http://www.bis.org/publ/work312.htm

2. Asia’s currency issue

a. (*)Michael P. Dooley, David Folkerts-Landau, and Peter Garber, 2004. The Revived Bretton Woods System. International Journal of Finance and Economics, vol. 9: 307–313.

b. (*)Takatoshi Ito, 2011. The Internationalization of the RMB: Opportunities and Pitfalls. Council on Foreign Relations Working Paper.
http://www.cfr.org/china/internationalization-rmb-opportunities-pitfalls/p26287

c. (*)Jeffery Frankel, 2011. Historical Precedents for the Internationalization of the RMB. Council on Foreign Relations Working Paper.
http://www.cfr.org/china/historical-precedents-internationalization-rmb/p26293

3. Asia’s financial centres

a. (ref)Joshua Felman, Simon Gray, Mangal Goswami, Andreas Jobst, Mahmood Pradhan, Shanaka Peiris and Dulani Seneviratne, 2011. ASEAN5 Bond Market Development: Where Does it Stand? Where is it Going? IMF Staff Papers. WP/11/137. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1869546

b. (*) Executive Summary, Sections I and II: from page 1 to page 59) Michael R. Bloomberg and Charles E. Schumer (City of New York and United States Senate), 2007. Sustaining New York’s and US’ Global Financial Services Leadership.
http://www.nyc.gov/html/om/pdf/ny_report_final.pdf

c. (ref) Global Financial Centres Index 11
http://www.zyen.com/long-finance/global-financial-centres-index-gfci.html

4. Law and finance: A framework for understanding stakeholders and governance of Asian firms

a. (*)Rafael La Porta, Florencio Lopez-De-Silanes, Andrei Shleifer and Robert W. Vishny,1998. Law and Finance, Journal of Political Economy, vol. 106, no.6, pp.1113-1155.

5. Law and finance: Global and Asian evidence

a. (*)Stijn Claessens, Simeon Djankov and Larry H.P. Lang, 2000. The Separation of Ownership and Control in East Asian Corporations. Journal of Financial Economics, vol. 58, pp.81-112

b. (ref) Rafael La Porta, Florencio Lopez-De-Silanes, and Andrei Shleifer, 1999. Corporate Ownership around the World, Journal of Finance, vol. 54, no.2, pp. 471-517.

c. (ref) Rafael La Porta, Florencio Lopez-De-Silanes, Andrei Shleifer and Robert W. Vishny, 1997. Legal Determinants of External Finance,
Journal of Finance, vol. 52, no.3, pp. 1131-1150.

6. State capitalism 1

a. (*)Andrei Shleifer and Robert R. Vishny, 1998. Perspectives of Government. Chapter 1 of
The Grabbing Hand: Government Pathologies and Their Cures, Harvard University Press ISBN 0674010140

b. (*)The Visible Hand, Special Report: State Capitalism, 2012.
The Economist, Jan. 21.

c. (*) Jianping Deng, Jie Gan, and Jia He (2011) Political Constraints, Organizational Forms, and Privatization Performance: Evidence from China, working paper.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=970056

7. State capitalism 2

a. (*)Allen, Franklin, Jun Qian and Meijun Qian (2005) Law, Finance, and Economic Growth in China.
Journal of Financial Economics 77: 57-116.

8. Family capitalism

a. (*) (from Lecture 5) Stijn Claessens, Simeon Djankov and Larry H.P. Lang, 2000. The Separation of Ownership and Control in East Asian Corporations.
Journal of Financial Economics, vol. 58, pp.81-112

b. (*)Mara Faccio, Larry H. P. Lang, and Leslie Young (2001) Dividends and Expropriation,
American Economic Review, Vol. 91 No. 1: 54-78.

c. (ref) Michael L. Lemmon and Karl V. Lins (2003) Ownership Structure, Corporate Governance, and Firm Value: Evidence from the East Asian Financial Crisis.
Journal of Finance, Vol. LVIII, No. 4: 1445-1468.

d. (ref) Asian Family Business Report (2011) Credit Suisse Research Institute
https://publications.credit-suisse.com/app/shop/index.cfm?fuseaction=OpenShopDetail&aoid=325378

9. Informal financial sector and South Asia

a. (*) Allen, Franklin, Rajesh Chakrabarti, Sankar De, Jun Qian and Meijun Qian (2012) Financing Firms in India,
Journal of Financial Intermediation Vol. 21 401-445.
Page 5 of 11

b. (ref, especially Section 7 on informal sector) Allen, Franklin, Rajesh Chakrabarti, Sankar De (2007) India’s Financial System. Working paper.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1261244

10. Corporate groups

a. (*) Kee-Hong Bae, Jun-Koo Kang and Jin-Mo Kim (2002) Tunneling or Value Added? Evidence from Mergers by Korean Business Groups.
The Journal of Finance, Vol. 57, No. 6, pp. 2695-2740

b. (ref) The Benefits and Costs of Keiretsu Financing. Chapter 6 of Takeo Hoshi and Anil Kashyap (2001) Corporate Financing and Governance in Japan. The MIT Press, Cambridge MA, ISBN 0-262-08301-9

c. (*) Mark Scher (2001) Bank-firm Cross Shareholding in Japan: Why is it, Why does it Matter, Is it Winding Down? DESA Discussion Paper No. 15, United Nations
http://www.un.org/esa/desa/papers/2001/esa01dp15.pdf

11. Global Financial Crisis and lessons from the Japanese Financial Crisis of the 1990s

a. (ref) Takeo Hoshi and Anil K. Kashyap (2010) Will the U.S. Bank Recapitalization Succeed? Eight Lessons from Japan. Journal of Financial Economics 97 398–417.

b. (*) Richard Koo and Masaya Sasaki (2010) Japan’s Disposal of Bad Loans: Failure or Success? – A Review of Japan’s Experience with Bad Debt Disposals and its Implications for the Global Financial Crisis – NRI Papers No. 151.
http://www.nri.co.jp/english/opinion/papers/2010/np2010151.html

c. (*) Richard Koo (2011) The World in Balance Sheet Recession: Causes, Cure, and Politics,
Real-world Economics Review No. 58 http://www.paecon.net/PAEReview/issue58/Koo58.pdf

Recommended Resources

Regularly reading business newspapers are strongly recommended, such as Business Times (Australia), Financial Times (London), Wall Street Journal (USA). The University library has FACTIVA, a database of business newspaper articles. Bloomberg is a good free source on the internet.
Learning & Teaching Activities

Learning & Teaching Modes

The course is based on lectures and hands-on learning group projects.

Workload

The information below is provided as a guide to assist students in engaging appropriately with the course requirements.

Weekly classes are 3 hours long. You can expect to spend about the same amount of time preparing for each class. The assignments and exam preparation will demand additional concentrated periods of non-classroom study, on your own or with your allocated student group. As a rough indication, you could expect to spend in the order of 120 hours of study time to complete the course, of which 36 hours would be in class.

There is no text book for this course. Please read the required readings prior to attending the lecture. There are on average two required readings for each lecture.

Learning Activities Summary

See timetable.

The University's policy on Assessment for Coursework Programs is based on the following four principles:

Assessment must encourage and reinforce learning.
Assessment must enable robust and fair judgements about student performance.
Assessment practices must be fair and equitable to students and give them the opportunity to demonstrate what they have learned.
Assessment must maintain academic standards.

Assessment Summary

Group Project

30%

Final Exam (Closed book)

70%

Assessment Related Requirements

Instruction for the group assignment

1. Group size will be determined in Week One based on class size.

2. The details of the assignment will be explained in Week One.

3. All students must form groups and the group leader must send one email with the names of all the group members before the beginning of class in Week Two.

4. Anyone not in a group according to those emails from group leaders will be randomly allocated to groups by the next day.

5. The group leader becomes responsible for submitting the group assignment.

6. Deadline: Due by email 02/06.

Group consultancy project
You are expected to submit a professional consultancy report as a team.

•Assume that you are a consultant firm to design an investment strategy for a professionally managed portfolio in Asian securities.
•Your assignment is to design an investment strategy for the fund manager who is going to actually buy and sell individual securities for his/her portfolio.
•Portfolio strategy must be a conceptual framework for a fund manager that sets its investment policy for a long-term horizon, rather than recommending certain securities to trade at certain timing.
•In the appendix please report below:
–Three Asian stocks a fund manager might select based on your strategy.
–Three Asian stocks a fund manager might want to avoid based on your strategy.
–The stocks must be among the constituent stocks in the MSCI Asia APEX 50 (ex-Japan). http://www.msci.com/products/indices/licensing/msci_asia_apex_50/
–Briefly summarize why the fund manager might chose each stock

Assessment Detail

No information currently available.

Submission

No information currently available.

Course Grading

Grades for your performance in this course will be awarded in accordance with the following scheme:

M10 (Coursework Mark Scheme)
Grade	Mark	Description
FNS		Fail No Submission
F	1-49	Fail
P	50-64	Pass
C	65-74	Credit
D	75-84	Distinction
HD	85-100	High Distinction
CN		Continuing
NFE		No Formal Examination
RP		Result Pending

Further details of the grades/results can be obtained from Examinations.

Grade Descriptors are available which provide a general guide to the standard of work that is expected at each grade level. More information at Assessment for Coursework Programs.

Final results for this course will be made available through Access Adelaide.

Student Feedback

The University places a high priority on approaches to learning and teaching that enhance the student experience. Feedback is sought from students in a variety of ways including on-going engagement with staff, the use of online discussion boards and the use of Student Experience of Learning and Teaching (SELT) surveys as well as GOS surveys and Program reviews.

SELTs are an important source of information to inform individual teaching practice, decisions about teaching duties, and course and program curriculum design. They enable the University to assess how effectively its learning environments and teaching practices facilitate student engagement and learning outcomes. Under the current SELT Policy (http://www.adelaide.edu.au/policies/101/) course SELTs are mandated and must be conducted at the conclusion of each term/semester/trimester for every course offering. Feedback on issues raised through course SELT surveys is made available to enrolled students through various resources (e.g. MyUni). In addition aggregated course SELT data is available.
Student Support
Policies & Guidelines
This section contains links to relevant assessment-related policies and guidelines - all university policies.
Fraud Awareness

Students are reminded that in order to maintain the academic integrity of all programs and courses, the university has a zero-tolerance approach to students offering money or significant value goods or services to any staff member who is involved in their teaching or assessment. Students offering lecturers or tutors or professional staff anything more than a small token of appreciation is totally unacceptable, in any circumstances. Staff members are obliged to report all such incidents to their supervisor/manager, who will refer them for action under the university's student’s disciplinary procedures.

The University of Adelaide is committed to regular reviews of the courses and programs it offers to students. The University of Adelaide therefore reserves the right to discontinue or vary programs and courses without notice. Please read the important information contained in the disclaimer.

Authorised by:	Deputy Vice-Chancellor and Vice-President (Academic)
Maintained by:	Course Outlines Administrator