Asymmetric foreign exchange exposure: a sector analysis

Standard finance theory argues that changes in exchange rate carry transaction and economic exposures on a firm’s expected future cash flows, which in turn affect the firm value. An extension of the theory further suggests that the foreign exchange effect may also be asymmetric. Although numerous empirical studies have attempted to detect the sensitivity of stock returns to exchange rate changes, conclusive evidence is far and between. The overall mixed findings in the literature could in part due to two specification problems, namely omission of relevant factors proposed by several theories and the presence of conditional heteroscedasticity in share price and exchange rate changes. Most studies on currency risk focus on major industrialized countries, such as Canada, France, Germany, Japan, the United Kingdom and the United States (US). A few studies across Asia Pacific have limited their investigation on firms or industries in a single country and examine only the exposure to the US dollar. Recent global financial crisis of 2007-2009 and fears of a sovereign debt crisis in some European countries have resulted in more volatile stock markets and exchange rate movements. This study aims to re-evaluate whether more volatile exchange rate movement has asymmetrically affected returns on the Australian stock market. Given that China, Japan and the European Union have overtaken the United States as Australia’s top three trading partners in recent years, these currencies would have significant impact on its stock market. Using weekly data, this study examines exposure to the Chinese yuan, the Japanse yen, the European euro, the US dollar and the trade-weighted index on the market and sector returns in Australia from January 1990 to June 2011. The generalised autoregressive conditional heteroscedasticity model is used to overcome the problem of conditional heteroskedasticity in price changes. The empirical results suggest significant exchange rate effects on Australian market returns for all five exchange rate series with asymmetric exposure to the Chinese yuan. At the sector level, domestic market return is found to have more significant influence than exchange rate risk on all sector returns. Of all 10 sectors, the four sectors that do not have any exchange rate exposure are Consumer Goods, Technology, Telecommunication and Utilities. The six sectors that have significant asymmetric exposure to at least one currency are Basic Materials, Consumer Services, Financials, Health Care, Industrials, and Oil & Gas. Of the six sectors, Basic Materials would benefit from the appreciation of the Australian dollar while the other five sectors would benefit from the depreciation of domestic currency. The results also suggest the Chinese yuan exposure on the sector returns has increased in recent years

Common Currency in East Asia: An Analysis of Currency Convergence

The recent global financial crisis of 2007-2009 and fears of a sovereign debt crisis in some European countries have fuelled the debates among economic analysts and policy makers on the future directions of monetary and exchange rate arrangements in the East Asian region. This paper applies both the cluster analysis and time series tests to determine whether increased trade and financial integration has led to currency convergence in the region over the period January 1990 to June 2010. The countries included in this study are the high-performing East Asian economies, namely China, Hong Kong, Japan, South Korea, Taiwan and the five founding ASEAN member countries. The Chinese yuan is found to be more suited than the Japanese yen as the anchor currency in East Asia

Optical studies of carrier and phonon dynamics in Ga_{1-x}Mn_{x}As

We present a time-resolved optical study of the dynamics of carriers and phonons in Ga_{1-x}Mn_{x}As layers for a series of Mn and hole concentrations. While band filling is the dominant effect in transient optical absorption in low-temperature-grown (LT) GaAs, band gap renormalization effects become important with increasing Mn concentration in Ga_{1-x}Mn_{x}As, as inferred from the sign of the absorption change. We also report direct observation on lattice vibrations in Ga1-xMnxAs layers via reflective electro-optic sampling technique. The data show increasingly fast dephasing of LO phonon oscillations for samples with increasing Mn and hole concentration, which can be understood in term of phonon scattering by the holes.Comment: 13 pages, 3 figures replaced Fig.1 after finding a mistake in previous versio

A Multi-Factor Analysis of AREIT Returns

Since 1990, the Australian Real Estate Investment Trust (AREIT) sector has experienced substantial growth and popularity. While the AREIT sector had benefit from the increased flow of funds from institutional investors during the 1997 Asian financial crisis, the recent impact of the 2008 global financial crisis has been a negative one. In this paper, we examine the sensitivities of annualised AREIT returns against a set of seven firm-specific variables and four market-wide risk variables. Balanced and unbalanced panel regressions are conducted on three sub-periods during 1990 - 2008 corresponding to the major phases in evolution of the AREIT sector. Our regression results find that size has a negative impact on returns, and this effect has been diminishing over time. Overall market risk was also found to be significant and positive only since 2003, suggesting that recently AREITs behave more like stocks and less like defensive assets. The relationship with exchange rate risk has been positive in recent years, due to more AREITs choosing to diversify internationally, particularly in the U.S. property markets. Our findings on the relationship between market-to-book ratios and AREIT returns depart from standard finance literature. In comparison to REITs in other countries, AREITs have shifted their preferences away from property-type diversification and into more specialised investment strategies. We also find contrasting evidence on the impact of international diversification, and that domestic AREITs provide better returns than internationally diversified counterparts. The relationship between returns and short term interest rates was found to be positive and significant prior to 2002, and the relationship with long-term interest rates was found to be negative and significant since 2003, suggesting that AREITs exhibit less bond-like characteristics in the past five years.AREITs, AREIT returns, Property-type diversification, International diversification, Panel regressions

Lead in Kuala Lumpur Urban Dust

A preliminary survey of lead in Kuala Lumpur urban dust was carried out. Lead levels of22.9 to 6986.6 JJgg-l were obtained, depending on the locations where.the dust was collected. There is a direct relationship between lead level in dust and traffic density. The amount of lead leachable by rain water is sufficiently high to warrant further investigation

NOD2/RICK-dependent β-defensin 2 regulation is protective for nontypeable Haemophilus influenzae-induced middle ear infection.

Middle ear infection, otitis media (OM), is clinically important due to the high incidence in children and its impact on the development of language and motor coordination. Previously, we have demonstrated that the human middle ear epithelial cells up-regulate β-defensin 2, a model innate immune molecule, in response to nontypeable Haemophilus influenzae (NTHi), the most common OM pathogen, via TLR2 signaling. NTHi does internalize into the epithelial cells, but its intracellular trafficking and host responses to the internalized NTHi are poorly understood. Here we aimed to determine a role of cytoplasmic pathogen recognition receptors in NTHi-induced β-defensin 2 regulation and NTHi clearance from the middle ear. Notably, we observed that the internalized NTHi is able to exist freely in the cytoplasm of the human epithelial cells after rupturing the surrounding membrane. The human middle ear epithelial cells inhibited NTHi-induced β-defensin 2 production by NOD2 silencing but augmented it by NOD2 over-expression. NTHi-induced β-defensin 2 up-regulation was attenuated by cytochalasin D, an inhibitor of actin polymerization and was enhanced by α-hemolysin, a pore-forming toxin. NOD2 silencing was found to block α-hemolysin-mediated enhancement of NTHi-induced β-defensin 2 up-regulation. NOD2 deficiency appeared to reduce inflammatory reactions in response to intratympanic inoculation of NTHi and inhibit NTHi clearance from the middle ear. Taken together, our findings suggest that a cytoplasmic release of internalized NTHi is involved in the pathogenesis of NTHi infections, and NOD2-mediated β-defensin 2 regulation contributes to the protection against NTHi-induced otitis media