Arbeitspapier

Explaining Foreign Holdings of Asia’s Debt Securities

In this paper, we analyze data on trends since 2000 in foreign holdings of government securities and other debt securities, with emphasis on Japan and developing Asia. We find that foreign residents generally increased their holdings of Asian debt securities during the sample period and in particular during the post-global financial crisis (GFC) period. Meanwhile, foreign holdings of debt securities have been declining in the eurozone. Foreign holdings of short-term debt securities were very volatile during the GFC period (2009–11), with a sharp drop in foreign holdings of short-term Asian debt securities that was followed by a renewed surge. Our empirical analysis suggests that despite the increase in foreign holdings of debt securities its share is still far lower than the optimal portfolio warranted by the capital asset pricing market theory. In other words, foreign investors’ home bias is still strong. The overall increase in foreign holdings of Asian debt securities appears to be driven by relatively stable exchange rates and the higher risk-adjusted returns on the debt securities of the region. Additionally, we find that investors were more "home-biased" during the GFC period and invested less in the markets of the major industrialized economies.

Language
Englisch

Bibliographic citation
Series: ADB Working Paper Series on Regional Economic Integration ; No. 124

Classification
Wirtschaft
Current Account Adjustment; Short-term Capital Movements
International Lending and Debt Problems
International Financial Markets
Economywide Country Studies: Asia including Middle East
Subject
Government debt
government securities
government bonds
government bills
government notes
debt securities
debt financing
debt holdings
foreign debt holdings
international capital flows
short-term capital movements
cross-border portfolio investments
safe haven
home bias
capital asset pricing model
optimal portfolios
global financial crisis
eurozone
Japan
developing Asia

Event
Geistige Schöpfung
(who)
Horioka, Charles Yuji
Nomoto, Takaaki
Terada-Hagiwara, Akiko
Event
Veröffentlichung
(who)
Asian Development Bank (ADB)
(where)
Manila
(when)
2014

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Horioka, Charles Yuji
  • Nomoto, Takaaki
  • Terada-Hagiwara, Akiko
  • Asian Development Bank (ADB)

Time of origin

  • 2014

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