Malaysia and Asia market linkage: analysis of global financial crisis

This study investigates the stock market linkage between the Malaysian stock market and key Asian stock markets, specifically analyzing the impact of the Global Financial Crisis (GFC) of 2007–2008. The core issue addressed is determining the volatility dependency of the Bursa Malaysia Composite Index (FBMKLCI) on the stock indices of the Asian region, considering the periods before and after the GFC. The research uses FBMKLCI as the dependent variable, while the independent variables include the Indonesia Stock Exchange Composite Index (IDX), Singapore Straits Time Index (STI), Korea Composite Stock Price Index (KOSPI), and the Stock Exchange of Thailand SET Index (Bangkok_SET). The methodology employs daily data, with 120 observations collected for each stock market index spanning both the pre- and post-crisis periods from the DataStream Professional database. The data was analyzed using EViews 8.0, incorporating descriptive statistics, unit root tests, correlation analysis, multiple regression, and diagnostic testing. The findings indicate differential market linkages across the two periods. Before the crisis, only the STI and Bangkok_SET showed a significant relationship with the FBMKLCI. After the crisis, the linkage expanded, with the STI, Bangkok_SET, and KOSPI all demonstrating a significant relationship with the FBMKLCI, providing a clear picture of the evolving stock market interdependency in the Asian region.