1. The Asian Bet Campbell R. Harvey Andrew H. Roper
Emerging Markets Corporate Finance
February 2003
The Asian Bet
Campbell R. Harvey
Duke University and NBER
Andrew H. Roper
University of Wisconsin

2. Asian Bet Three levels of risk Decreased profitability
Increased leverage
Increased U.S. dollar leverage

25. Figure 11:
IFCG Concentration Ratios Based Upon Top 10 Firms

26. Figure 12: Asset Concentration by Market Capitalization

27. Figure 13: Industrial Concentration Of Market Indices

28. Figure 14: Value Traded Concentration Across Countries

57. Asian Bet Measuring exchange rate exposure Traditional method:
Regression of company j in country i return on FX change.
Rijt=b0ij+b1ijDFXit + errorijt

58. Asian Bet Measuring exchange rate exposure
What about the case of Thailand?
FX rate pegged to basket
bijt=0
Does this mean no FX exposure?

59. Asian Bet VaR method Go through balance sheet item by item
Categorize all debt by denomination
For a 10% devaluation, what is the loss in market value estimated in the debt
This approximates the impact on firm’s capitalization

60. Asian Bet VaR method issues:
FX impacts both revenues and costs, not just value of debt
FX as a common country factor could have an adverse effect on entire economy, further depressing equity value
FX as a country factor could induce a regional contagion