The Influence of The Asean Regional Capital Market on Asean-5 Countries' Foreign Exchange Reserves

ABSTRACT


Introduction
The capital market plays an important role in sustaining the economy, particularly in allocating public monies. Through the technique of selling securities in the form of shares or issuing bonds, an agency or firm can use the capital market as a long-term source of finance. It was also stated that, in addition to an economic purpose, the capital market serves a financial function. The economy's function can be understood as a mechanism of connecting investors with parties in need so that the agreements and transactions that ensue benefit both sides. While the financial function is visible in the incentive or rate of return earned by investors for their investment.
The existence of a capital market can create opportunities for investors to benefit more. Investors can economically and efficiently allocate their capital. Investors can make chosen investment decisions in productive sectors that are thought to be capable of providing returns based on the expected level of each investment decision (Tandelilin, 2018). Stocks, as a stock market tool, are well-known and in high demand among investors. Stock buying and selling

Capitalization of the Capital Market
The market capitalisation of a corporation indicates its worth. This figure represents the price of all stock exchange shares. A public company's market capitalisation is crucial since it indicates the company's size. If the market capitalization value grows, the company's size grows as well, and the company's value grows as well. To determine the value of a company's capitalization, multiply all outstanding shares by the company's market share price (Setiawan & Hidayat, 2017) Market capitalization is a business phrase that relates to a firm's overall price, specifically the price that someone must pay if they wish to purchase 100% ownership of the company. Market capitalization is the worth of a company's circulating shares in the market. It should be understood that the value of a corporation differs from the value of its assets, therefore a company's market capitalization does not reflect the value of its assets (Herlambang, 2018) Market capitalization is the market value of an issuer's outstanding shares. Market capitalization is the valuation of a publicly traded corporation whose shares are traded on a stock exchange. The market price is the simplest to calculate because it indicates the price of a stock in the current market. If the stock exchange market is closed, the closing price is the market value. (Final pricing). So, this is the market price that shows a stock's growth. When this market price is multiplied by the number of shares issued (outstanding shares), a common market value known as market capitalization is obtained. (Capitalization of the market). Of course, the value of the stock market capitalization fluctuates in response to changes in the market (Hartono, 2017) The difference between the market price or closing price and the number of shares issued is the market capitalization. As a result, market capitalization equals the value of the number of shares issued by the corporation. In general, companies with a high market capitalization are attractive to long-term investors due to the company's incredible growth potential, dividend distribution, and comparatively minimal risk exposure. Because there are so many fans, stock prices are often relatively high, implying that returns will be high (Masyie, 2021)

Foreign exchange reserves
Foreign exchange reserves are defined as any foreign assets controlled by the monetary authorities that can be utilized at any time to finance balance-of-payments imbalances, preserve monetary stability through foreign exchange market intervention, or for other purposes. According to this concept, a country's foreign exchange reserves can be utilized to preserve exchange rate stability and fund a balance-of-payments deficit (Agung & Suresmiathi, 2015) Foreign exchange reserves are the entire amount of foreign currency possessed by a country's government and private sector. The state of the balance of payments can be used to calculate foreign exchange reserves. The bigger the amount of foreign exchange owned by a country's government and inhabitants, the better the country's ability to conduct international economic and financial transactions and the stronger the country's currency (Rahmawati, Ismanto, & Sitorus, 2020) International reserves are liquid and highly valuable assets owned by a country that have been recognized by the international community as legal tender in international transactions or payments. The level of a country's foreign exchange reserves is an important element for that country to consider when conducting international commerce dealings with other countries. Natural resources are a plentiful source of foreign exchange reserves and can be traded internationally. Gold, gas, oil, rubber, coffee, wood, and other natural resources are examples (Sonia & Setiawina, 2016) The current account and imports of a country have an impact on its foreign exchange reserves. A country's current account development must be monitored since a long-term current e-ISSN: 2723-6692 p-ISSN: 2723-6595 account deficit can put pressure on foreign exchange reserves. As a result, the current account deficit is frequently regarded as an indication of macroeconomic imbalances that necessitate exchange rate changes or tight macroeconomic policies (Mustaqim & Widanta, 2021) Foreign portfolio investments and capital flows into and out of the capital market are also thought to have influenced the value of foreign exchange reserves. Foreign capital market investment contributes to a balanced balance of payments. Foreign capital not only serves to cover the deficit in domestic capital that domestic savings cannot fill, but it also helps to fill the emptiness in the foreign exchange gap through asset sales. Capital transactions are carried out in the balance of payments to balance the credit side in the double-entry bookkeeping system (Salvatore, 2011)

Materials and Methods
This study's research design is explanatory research analysis, often known as hypothesis research by explanation. Explanatory research is an analytical approach used to evaluate hypotheses and explain the causal link between variables. According to opinion Bungin Burhan, 2019, the explanatory format is used to convey a generalization or explain the link of one variable with another variable; thus, explanatory research uses hypothesis testing utilizing inferential statistics (for hypothesis testing) (Bungin Burhan, 2019) Inferential statistics and panel data regression analysis were utilized to analyze the data in this study. The research method used in this study is associative research, according to the level of explanation. Associative study seeks to identify the association between two or more variables. According to the type of data and quantitative data analysis (Sugiyono, 2016)  The statistical t value of capital market capitalization is 19.83430, with a probability value (P-value) of 0.0000, according to Table 1. Because this number is less than the stated significance criterion of 0.05, H0 (no significant effect) is rejected, whereas H1 (significant effect) is allowed. A positive statistical t value denotes a one-way link. Thus, capital market capitalisation has been shown to have a large and favorable effect on foreign exchange reserves.

Results and Discussions
The magnitude of the influence of capital market capitalization on foreign exchange reserves is shown by the value of R-Squared = 0.891970, which means that the magnitude of the influence of capital market capitalization on foreign exchange reserves is 89.19 percent, with the remaining 10.81 percent influenced by factors other than the model under consideration.
The following is the potential foreign exchange reserves from capital market capitalization in 5 (five) ASEAN countries :

Table 2. Potential Foreign Exchange Reserves of 5 ASEAN Countries
According to Table 2, Singapore has the greatest potential to become the country with the largest foreign exchange reserves based on capital market capitalization, followed by Thailand, Indonesia, the Philippines, and Malaysia as the countries with the least potential foreign exchange reserves based on capital market capitalization.

Conclusion
Capital market capitalisation has a large and beneficial impact on five ASEAN countries' foreign exchange reserves. It has been able to raise the value of capital market capitalization with a stable and favourable domestic investment climate supported by domestic currency exchange rates in the five ASEAN countries, which will also have an impact on raising foreign exchange reserves in each ASEAN country. The strategy for increasing foreign exchange reserves in each ASEAN country is to optimize all functions owned by this foreign exchange, such as increasing investment from abroad, both through FPI and FDI, maintaining value stability, rupiah exchange at a fair rate, low inflation, and a safe current account deficit. Strengthening foreign exchange reserves is a critical step that must be taken to increase economic resilience, particularly in the face of global economic uncertainties.