Sukuk Investors’ Confidence Following The 2008-Crisis: A Perspective From Maqasid Shariah For The Covid-19 Pandemic

Abstract

Changes in investors’ confidence may trigger changes in asset prices. Investor sentiment may be an essential factor in the market pricing process to explain changes in the stock market index. The purpose of this study is to look into the confidence effects on Sukuk investors in Malaysia following the COVID-19 pandemic using the impact of the global financial crisis of 2007/2008 as a reference. The confidence effect will be measured using an Equity Market Sentiment Index (EMSI). This study focuses on FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBMKLCI), FTSE Bursa Malaysia Emas Shariah Index (FBM EMAS), FTSE Bursa Malaysia Hijrah Shariah Index (FBM HIJRAH), and Dow Jones Islamic Market (DJIM). The sources of data include Datastream, Bloomberg database, Securities Commission Malaysia, and Bursa Malaysia. The investors’ confidence to issue Sukuk increased after the crisis. The investors’ behaviour showed that they avoided risks in their portfolio, but they tend to seek chances when they are confident. Therefore, intelligent investors are those who accept higher risks with higher returns. Concerning the objective, Sukuk investors did not display high risk-seeking behaviour before the 2008 crisis. The Sukuk investors during the COVID-19 pandemic have also referred to this situation of the 2008 global financial crisis to seek chances and confidence to issue and invest in Islamic bonds, where there are higher risks with higher returns. This analysis provides valuable information and guidelines to issuers, policymakers, regulatory bodies, and investors, both Muslim and non-Muslim, and can draw them to Islamic bonds, Sukuk. This research proceeds by investigating the stock market reactions in the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FTSEKLCI), the FTSE Bursa Malaysia Emas Shariah Index (FTSE EMAS), the FTSE Bursa Malaysia Hijrah Shariah Index (FTSE HIJRAH), and the Dow Jones Islamic Market Index (DJIM) to the issuance of Sukuk in Malaysia. This study compares the reactions of different stock markets using the domestic index, the global index, and the Islamic index. For the domestic index, this study uses the FTSEKLCI covering the period studied from 2004 to 2011. For the global Islamic index, this study uses the DJIM index. Finally, this study uses both the FTSE EMAS and the FTSE HIJRAH indices for the local Shariah index. daily returns for each of the Sukuk-issuing securities. This study computes the average standard deviation of daily return…