Stock Market Performance:Foretelling and Crisis Signalling

Abstract

This paper highlights some of the vulnerabilities seen as over- arching in the SEACEN economies. As the global economy recovers, the following scenarios are probable. Firstly, a possible upward shift of interest rates in developed economies could destabilize the emerging financial markets. Secondly, a potential rapid fall in capital inflows to SEACEN economies as the tapering takes full effect could pose growth risks. Thirdly, the shadow banking system could become a source of systemic risks and create opportunities for arbitrages. The paper also highlights the need for central banks to expand their toolkit to complement monetary policies, in particular macroprudential measures.