Essay On Asian Contagion

In beginning of the summer in 1997, the economy market arise one incredible financial crisis, also called “Asian Contagion”. In that time arise series currency devaluations and some others factor that make it spread through many Asian market. In this time the first nation failed in currency market as Thailand. The crisis spread rapidly throughout South Asia and make the stock market declined even the revenue of import decrease (Investopedia, n.d.). The investor at that time is very skittish of all the emerging market to do the investment. However, there is more investor less to invest the emerging market at the initial stage of the financial crisis. After all, the IMF (International Monetary Fund) bailout other countries by using bonds to making the economic market recovers. Nevertheless, the investors’ return in the emerging market is short-lived as the end of

If the exchange rate rises, it will make the equity of the nation cheaper for the foreign investor, vice versa. Hence, the fluctuation of the exchange rate would impact the investor decision making (Gunasekarage & et.al, n.d.). According to Pal and Mittal (2011), there indicated the exchange rate is the one of the variable that is long-term relationship with the stock market and it said the exchange rate is one of the importance variable to determine the Indian’s stock market.

There are several factors that affect the stock market behavior in South Asia. As stated in Dr. Aurangzeb (2012), the performance of stock markets is affected by the interest rates and it has a negative and significant impact. Whenever the interest rates increases, the investor will tend to invest less in stock markets and move their investment to other sector which is less costly and more profitable. The other reason could be the investor finds that it is more profitable to save their money in the bank instead investing in the risky and fluctuated stock