The relationship between Islamic stock market, sukuk, Islamic bank assets and macroeconomic variables in Malaysia

Mohd Yahya Mohd Hussin

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Type :	article
Subject :	HG Finance
Main Author :	Mohd Yahya Mohd Hussin
Additional Authors :	Muhammad Aiman Farhan
Title :	The relationship between Islamic stock market, sukuk, Islamic bank assets and macroeconomic variables in Malaysia

Place of Production :	Tanjong Malim
Publisher :	Fakulti Pengurusan dan Ekonomi
Year of Publication :	2019
Corporate Name :	Universiti Pendidikan Sultan Idris
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Abstract : Universiti Pendidikan Sultan Idris

This paper focuses on the relationship between the Islamic stock market, sukuk, Islamic bank assets and the macroeconomic variables in Malaysia by looking at the market reaction of Islamic shares represented by the FBMES Index to the selected Islamic finance instruments and macroeconomic variables. The Vector Auto Regression (VAR) method was applied to the model of the study. The selected variables to be used in this study comprised the FBMES Shariah Index (FBMES), Sukuk Issuance (SI), Gross Domestic Product (GDP), Real Effective Exchange Rate (REER), Islamic Bank Assets (IBA), Islamic Interbank Rate (IIR), Crude Palm Oil Prices (CPO) and Crude Oil Prices (CO). The data chosen for this particularwas in the form of quarterly data from the first quarter of 2007 to the fourth quarter of 2017. The results indicated that the FBMES Index was integrated with the set of selected macroeconomic and Islamic finance variables in which it was positively and significantly connected with the SI variable but related negatively and significantly with the CO variable. On the other hand, its relationship with the GDP and REER variables was positive but not significant. In relation to other variables which were IBA, IIR and CPO, the resulting relationship was a negative and insignificant relationship. From the aspect of Granger's causal relationship and the pioneer indicator, it was discovered that the SI, GDP, IBA, IIR and CO variables were the short-term causes of Granger to FBMES while variable REER and CPO variables did not show evidence of the short-term causal relationship Granger. FBMES was the cause of short -term Granger to IBA and GDP variables but not for other variables

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