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1st
Quarter 2001
(Issue No. 117)
Synopsis
Rationale
of Capital and Exchange Controls
by Mohamed Aslam ( University of Malaya)
The capital and exchange controls, which were introduced in
Malaysia on 2 September 1998, came as a surpise to domestic and international
financial markets. The government¡¯s action has been criticised mainly from
market players. To some degree, it may be true that the effectiveness of the
measures is uncertain since it was introduced during a time when the economy
was facing a crisis. Nevertheless, we cannot dismiss the fact that the measures
had restored macroeconomic (financial) stability. This paper primarily looks at
the rationality of the control measures, which is crucial in order to develop
an understanding of the purpose and the importance of such measures for an
economy that relies heavily on the external sector for economic growth.
Financial
Liberalisation and Currency Vulnerability
by Dr Obiyathulla Ismath Bacha and Dr Ruzita Md Amin (International Islamic
University Malaysia)
This paper examines the issue of financial liberalisation in the
light of the 1997-98 East Asian currency crisis. Following an overview of the
liberalisation process in the four crisis countries, Malaysia, Thailand,
Indonesia and South Korea, we analyse macroeconomic data for these countries
over the 7-year period preceding the crisis. By 1997, when the crisis broke,
all four countries had largely liberalised their financial sectors and their
capital aAccounts. However, several of the prerequisites needed for successful
liberalisation were lacking. Liberalisation was also incomplete and had several
policy contradictions. These inherent contradictions had given rise to serious
incentive problems which given the freedom of liberalisation had in turn
accentuated currency and banking system vulnerability. While the movement away
from financial repression had eliminated or eroded existing control mechanisms,
the partial liberalisation did not allow market driven self-correcting
mechanisms to properly function.
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Intraday
Price Discovery in the Malaysian Stock Index Futures and Cash Markets
by Dr Tan Hui Boon and Lim Chee Seong (Universiti Putra Malaysia)
This study examines the intraday dynamic causal and interaction
effects between the Kuala Lumpur Stock Futures and its underlying cash index.
The intraday analysis is crucial since many of the price adjustments could have
taken place during the trading hours. Such real time adjustments can only be
captured by the intraday price analysis. The empirical evidences obtained from
this study is quite in line with those found in the developed markets, the
futures prices and hence the returns appear to react more rapidly to new
information as compared to the cash prices. Besides, the futures index also
indicates a stronger degree of price leadership over the cash index. The
relative effectiveness of the futures market and its vital role in the sector
could be due to the restriction on the short selling of stock in the KLSE cash
market, and the relatively lower trading cost in the futures market. Since the
futures prices respond more rapidly to innovations that the stock prices, the
intraday futures prices performance can thus be used by traders to gauge the
future movements of the cash prices.
Role
of Call Centres in a Multi-Channel Environment
by David J Cavell (UK-based consultant)
The continued development and deployment of banking call centres
(or contact centres) ¨C since they first came into being in the 1980s ¨C has
made them a cornerstone of delivery channel strategy. However, since the launch
of the first call centres, much has changed. Over the last decade, we have seen
the first stage of the ¡®virtual¡¯ revolution, which has greatly increased the
number and nature of delivery channels. Another key development during this
period has been the great change to the competitive environment in which we
operate; which has now come to include life companies, car manufacturers, food
retailers, and many more ¨C all with retail banking propositions. In addition,
the industry is undergoing a major rationalisation in many parts of the world.
This paper looks at the origins of the call centre, with a brief review of five
fundamental trading models. It also examines some of the opportunities and
challenges that this legacy channel now offers retail bankers.
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M
& A Activities in the Banking Industry
by Chow Sang Hoe and Chee Kok Lim (Andersen)
Despite the increasing size and pace of mergers over the past decade, the
majority of corporate combinations do not achieve the objectives set by
management. The reasons may vary but come down to four key areas ¨C mispricing,
lack of strategic fit, poor implementation and unrealistic expectations. In
consequence, the potential value of these combinations, rather than being
unleashed, has been unrealised. However, the urge to merge or to seek alliances
will continue to dominate the financial services industry in the networked
economy, especially as many areas of this economy are over-provided with
financial services and under-provided with the profitable future business base
they will need to thrive in the years ahead. As global markets move into a more
sombre period of growth, achieving value in these corporate combinations both
quickly and sustainable will become the business imperative. This research
report is based global survey covering 300 financial institutions aimed at
assessing how they are approaching corporate combinations.
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