© 2021 JETIR April 2021, Volume 8, Issue 4 www.jetir.org (ISSN-2349-5162) JETIRES06079 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 368 ASIAN STOCK MARKETS INTEGRATION – AN EMPIRICAL APPROACH C.Padma Prabha 1 , Dr.K.Maran 2 1 Research scholar, Mother Teresa women’s University, Kodaikanal 2 Director, Sairam Institute of Management studies, Chennai ABSTRACT Asia is leading digitalization, which promises the world economy to be fundamentally changed. Asian growth faces some fundamental challenges, although the region should be well placed to stay ahead over the next decade and beyond with sustained constructive and sound policy-making. This growth has also brought about dramatic financial-market changes in the Asian region, and stock markets in Asia are no exception. Since 2000, the growth of business on Asian capital markets has led to several national and regional initiatives to promote integration in regional and global capital markets. Taking into account the different dimensions of Asia’s growth and degree of integration, it was important to examine the extent to which Asian markets are integrated with a particular focus on India, China, Japan, Hong Kong and Singapore. The integration of these selected Asian markets was evaluated using the Johansen Cointegration Test and an attempt was made to test the causal relationship using Granger Causality test. The results of the study indicate that these markets have strong long-term integration. Key words: Johansen Cointegration test, Granger Causality test JEL Classification G15,G17 INTRODUCTION Since 2000, the increase in operation on Asian capital markets has spawned a slew of national and international initiatives aimed at strengthening regional and global capital market integration. As one of the fastest-growing stock markets, the Chinese market has recently undergone major changes, owing to increased foreign investment interest. Historically, the direct investment by foreign investors in the Chinese mainland stock markets had been limited. It was allowed to invest only in shares denominated in foreign currencies – known as B shares – that were less liquid than shares denominated in Renminbi. A number of programs, like the Qualified Foreign Institutional Investor (QFII) and the Renminbi Qualified Foreign Institutional Investor (RQFII) were launched to provide foreign investors with access to the Chinese market, enabling foreign institutional investors to be involved in the national mainland market. These two plans, however, are only available to institutional investors and not to individual investors. The Stock Connect programme between the Hong Kong and Shanghai Stock Exchanges was introduced in 2014 as part of a Mutual Market Access Program, offering non-Chinese retail investors access to Chinese mainland stocks. Tokyo Stock Exchange, the region's largest exchange by total market capitalization at the end of 2017, has also seen an increase in foreign ownership of listed shares. The share of foreign investors, mostly institutional investors, increased from 6% to 30% between 1980 and 2016. Cross-border portfolio investments can be used as an indicator of regional and global integration to broaden the perspective to regional level. Asia’s share of both inward and outward portfolio investment is growing steadily. Asia's share of outward portfolio equity investment increased from 7 per cent in 2001 to 15 per cent in 2017, while its inward share increased from 13 per cent in 2001 to 19 per cent in 2017, making Asia a net recipient of foreign portfolio equity investment. India's promise is driven by key growth drivers, including a favorable demographic profile, a skilled workforce, an emerging middle class, a strong business culture, increased productivity and a resilient private sector. The strong economic fundamentals of the country, high GDP growth rates and long-term potential make it an attractive destination for business and investment across borders. With a growth rate of 7.7 percent in the fourth quarter of 2017-18 (Central Statistics Office), the Indian economy has regained the tag of being the fastest growing economy in the world. With consistently high economic growth rates and enormous potential, the Indian economy has really taken the global center stage While in recent years the pace of regional integration has increased, Asian stock markets remain more integrated with global stock markets than at regional level. The majority of the intra-regional cross-border holdings are concentrated in several Asian economies, accounting for more than half of the total intra-regional transactions to and from Hong Kong, China or China. REVIEW OF LITERATURE Using monthly data from 1 January 2001 to 31 December 2011, Hunjra et al (2014) used Cointegration and Granger Causality to investigate the effect of macroeconomic factors such as exchange rates, inflation rates, GDP, and interest rates on Pakistan's stock price. In the short run, their results showed no association between stock price and macroeconomic variables.. To examine the effect of macroeconomic variables such as exchange rates, foreign exchange reserves, industrial output index, interest rate, import, money supply, wholesale price index, and export, Hussain et al. (2012) used Augmented Dickey-fuller (ADF) and Kwiatkowski-Phillips- shin (KPSS) unit root tests, Johansen co-integration test, vector correction model (VECM), and Granger causality test. Mishra (2002) looked into India's domestic financial market's international integration with the capital market in the United States. He discovered a positive correlation between NASDAQ and BSE using the ordinary least squares (OLS) approach and cointegration technique. He