The Influence Of International Capital Flows On Domestic Stock Market

In the early 21st Century,with the gradual improvement of the capital market system and the gradual maturity of supervision,the capital market in China began to attract more and more international capital inflows.International capital provides a large amount of funds for the development of our country's real economy and the construction of capital market.However,in recent years,the reform of exchange rate and the changes in the economic situation of the United States have led to a significant fluctuation in the exchange rate of the RMB.Under this background,it may lead to frequent international capital flows in the stock market and may increase the risk of large fluctuations in stock index,which will adversely affect the smooth and healthy development of China's capital market.This study focuses on the impact of international capital flows on the domestic stock market.First,it focuses on factors that influence international capital flows,including exchange rate,interest rate,asset price and economic prosperity,and international capital flows.Secondly,it analyzes the pathway of international capital flows to the stock market,focusing on Qualified Foreign Institutional Investors(QFII)and RMB Qualified Foreign Institutional Investors(RQFII),which have the largest amount of capital and trading volume.The main features of the inflow of international capital into the stock market are qualitatively analyzed,including investment amount,investment intentions,investment targets,influencing factors and investor structures.The description of QFII and RQFII investment intentions are defined as "QFIIinvestment ratio".Third,VAR model is established on the basis of the QFII investment ratio,stock index,exchange rate expectations,interest-rate spread and PMI index variables.Granger causality test,impulse response function,and variance decomposition method are used to quantitatively analyze the interrelationship between each variables.Especially,QFII ratio and stock index are the research key points.Finally,main conclusions are drawn that QFII and RQFII are rational value investors who will play an important role in maintaining the stable and healthy development ofChina's stock market in the long run,and will help a little to raise stock index.At the same time,some suggestions for regulators are given.First,the approval of QFII and RQFII should be encouraged and accelerated.Second,an international equity investment platform should be built.Third,other international capital inflow channels should be further explored.Fourth,pay close attention to the change of risk and strengthen the dynamic management of risk.Fifth,attract foreign financial institutions to our country more quickly.