The Effects Of China Economy On The Stock Prices In The Asean Region

Abstract

This study examines China’s EPU (Economic Policy Uncertainty) and TPU (Trade Policy Uncertainty) factors affecting stock prices in ASEAN region, which were represented by four ASEAN economies in analyzing such as Malaysia, the Philippines, Singapore, and Thailand. The dynamic correlation is investigated the effects of Chinese economic policy uncertainty on stock market returns of the ASEAN region in the period from 1979Q2 to 2019Q4 and the effects of Chinese trade policy uncertainty on stock market returns of the ASEAN region in the period from 2000Q1 to 2019Q4. The utilization of the VAR model to determine how the stock market in each nation reacts to China's economic policy instability shocks. The study investigates the effects of China’s Economic Policy Uncertainty (EPU) and Trade Policy Uncertainty (TPU) on specific macroeconomic variables of the economies in the ASEAN region (i.e. EQ (equity prices), EP (exchange rate), DP (inflation), Y (real GDP), and R (Short-term interest rate)). The results demonstrate that the impact of China's EPU shock on the variables of the ASEAN economies leads to equities falling, the domestic currency depreciating, and output declining but its impact is not too large and obvious like the influence of China's TPU shock on ASEAN’s stock markets