Covid-19, Financial Markets (Islamic vs Non-Islamic), and Exchange Rate: Does the Malaysian Market Offers Diversification Opportunities to the Investors?

We explore the impact of Covid-19 towards Islamic and non-Islamic financial markets in Malaysia. We employ the wavelet coherency approach (WCA) which allows a deeper investigation of the relationship between the selected variables in terms time-frequency domain. We document that (i) Islamic capital markets represented by FTSEBMEI and MyETFDJIMMT25 are performing better during the Covid-19 period and also offer a greater investment opportunity to the investors for diversification purposes, (ii) non-Islamic index, FTSEBMKLCI, was less affected during this pandemic, and the market offers better risk and optimal diversification benefits to the investors as time progresses, and (iii) exchange rate appears to be more stable and within the phase category, indicating the co-movements are relatively strong in smaller scales. Understanding the impact of Covid-19 on the financial markets will lend to a better portfolio investment design which considers return and risk

VOLATILITY SPILLOVER OF INTRADAY EXCHANGE RATES ON SOME SELECTED ASEAN COUNTRIES

In this paper, we use hourly exchange rate data for selected ASEAN countries (Singapore, Indonesia, Malaysia, Thailand and the Philippines) to test the hypothesis that exchange rate own shocks dominate exchange rate volatility. We find strong evidence that own exchange rate volatility explains between 64% to 86% of their own exchange rate volatility movements. These results do not change when we include the Chinese CNY currency in the analysis. Moreover, we find that exchange rate shocks of ASEAN countries explain 36%, 24% and 23% of exchange rate volatility movements of Indonesia, Thailand, and Singapore, suggesting that for these countries are more synchronized

COVID-19 cases, deaths, vaccinations and Malaysian Islamic stock market returns / Lain-Tze Tee and Si-Roei Kew

Coronavirus (COVID-19) has been the greatest disrupting pandemic that results in economy and social devastations. This study aims to explore the impact of novel COVID-19 pandemic on Islamic stock market returns in Malaysia. We find that COVID-19 new cases exert negative and significant effect on Islamic stock market returns. In addition, COVID-19 deaths significantly and adversely influence Islamic stock market returns. Particularly, the findings reveal that higher levels of COVID-19 new cases and deaths tend to reduce Islamic stock returns in Malaysia. Interestingly, we document that vaccinations have no impact in influencing Islamic stock market returns, signifying that vaccinations are not effective in improving Islamic stock market returns in Malaysia over the sample period. Our findings provide important implications for academics, policymakers and investors to comprehend the effect of COVID-19 on Islamic stock returns. The results suggest that Islamic stock investments in Malaysia do not show as a superior investment option during the health crisis

COVID-19 Cases, Deaths, Vaccinations and Malaysian Islamic Stock Market Returns

Coronavirus (COVID-19) has been the greatest disrupting pandemic that results in economy and social devastations. This study aims to explore the impact of novel COVID-19 pandemic on Islamic stock market returns in Malaysia. We find that COVID-19 new cases exert negative and significant effect on Islamic stock market returns. In addition, COVID-19 deaths significantly and adversely influence Islamic stock market returns. Particularly, the findings reveal that higher levels of COVID-19 new cases and deaths tend to reduce Islamic stock returns in Malaysia. Interestingly, we document that vaccinations have no impact in influencing Islamic stock market returns, signifying that vaccinations are not effective in improving Islamic stock market returns in Malaysia over the sample period. Our findings provide important implications for academics, policymakers and investors to comprehend the effect of COVID-19 on Islamic stock returns. The results suggest that Islamic stock investments in Malaysia do not show as a superior investment option during the health crisis

PALM OIL PRICE–EXCHANGE RATE NEXUS IN INDONESIA AND MALAYSIA

In this study, we extend the literature analyzing the predictive content of commodity prices for exchange rates by examining the role of palm oil price. Our analysis focuses on Indonesia and Malaysia, the two top producers and exporters of palm oil, and utilizes daily data covering the period from December 12, 2011 to March 29, 2021, which is partitioned into two sub-samples based on the COVID-19 pandemic. Relying on a methodology that accommodates some salient features of the variables of interest, we find that on average the in-sample predictability of palm oil price for exchange rate movements is stronger for Indonesia than for Malaysia. While Indonesia’s exchange rate appreciates due to a rise in palm oil price regardless of the choice of predictive model, Malaysia’s exchange rate only appreciates after adjusting for oil price. However, both exchange rates do not seem to be resilient to the COVID-19 pandemic as they depreciate amidst dwindling palm oil price. Similar outcomes are observed for the out-of-sample predictability analysis. We highlight avenues for future research and the implications of our results for portfolio diversification strategies.In this study, we extend the literature analyzing the predictive content of commodity prices for exchange rates by examining the role of palm oil price. Our analysis focuses on Indonesia and Malaysia, the two top producers and exporters of palm oil, and utilizes daily data covering the period from December 12, 2011 to March 29, 2021, which is partitioned into two sub-samples based on the COVID-19 pandemic. Relying on a methodology that accommodates some salient features of the variables of interest, we find that on average the in-sample predictability of palm oil price for exchange rate movements is stronger for Indonesia than for Malaysia. While Indonesia’s exchange rate appreciates due to a rise in palm oil price regardless of the choice of predictive model, Malaysia’s exchange rate only appreciates after adjusting for oil price. However, both exchange rates do not seem to be resilient to the COVID-19 pandemic as they depreciate amidst dwindling palm oil price. Similar outcomes are observed for the out-of-sample predictability analysis. We highlight avenues for future research and the implications of our results for portfolio diversification strategies

Long-Run Determinants of Inflation in Malaysia and Indonesia: Does Geopolitical risk matter?

This study attempts to investigate the determinants of inflation in Malaysia and Indonesia in the long run. By using macroeconomic variables that theoretically matter to manage inflation such as money supply and exchange rate, this study also includes geopolitical risk index as proxy of uncertainty to be investigated further as another determinant that may cause the increasing of inflation rate in Malaysia and Indonesia. The data covers the period 2014:M11 to 2023:M8. Autoregressive distributed lag (ARDL) approach is employed to determine the long-run relationship. The main findings in this study demonstrate that the money supply and geopolitical risk are among the determinants of inflation in Malaysia in the long run. Meanwhile contrary to that, only money supply determines inflation in Indonesia. The finding indicates that money supply and geopolitical risk matter to inflation management. Hence, this study suggests that monetary authorities must take an active role towards money supply and geopolitical risk issue

Impact of Movement Control Order on Risk-Adjusted Performance of the Malaysian Real Estate Investment Trusts (M-REITs)

The first Movement Control Order (MCO) implemented by the Malaysian government from 18th March 2020 to 3rd May 2020 was unprecedented. Since Malaysia was only mildly affected by previous epidemics or pandemics unlike the COVID-19, studies of the pandemic impact on the performance of Malaysian firms and M-REITs in specific were limited. To close this gap, this study compares Sharpe ratio, Treynor ratio and Jensen Alpha ratio of 18 M-REITs for sub-periods before, during and after the MCO. Paired sample t-test results for all these three risk-adjusted performance measures consistently show that M-REITs significantly performed better during the MCO compared to before the MCO as well as after the MCO compared to before the MCO. The results suggest that the business model and portfolio of real estate managed by M-REITs are resilient against both systematic and unsystematic risk factors, and imply that the intrinsic value of M-REITs is not significantly affected by the market uncertainty caused by movement restriction. The findings also bolster investors’ confidence to include M-REITs as part of their diversified investment portfolio to achieve sustainable return performance in the post-Covid period. To remain resilient and sustainable, the management of M-REITs should diversify the portfolio of properties and real estate they managed since the movement restriction had varying repercussions on different types of real estate. Rooms for further diversification are justified by a larger percentage of M-REITs having positive Treynor ratios after the MCO sub-period if compared to positive Sharpe ratios. A well-diversified portfolio managed by an M-REIT can reduce unsystematic risk, which is part of the total risk measured by standard deviation, eventually moving towards a positive Sharpe ratio

Influence of COVID-19's active cases on Malaysia's key economic performance indicators / Abd Hadi Mustaffa …[et al.]

The COVID-19 outbreak was a rare and unprecedented phenomenon. Hence, the pandemic forces the world economy to react unpredictably. Governments worldwide have undertaken several precautions, including social distance measures, public awareness programs, policies on testing and quarantine, and financial aid packages. Using endogenous growth theory, this paper examines the impact of COVID-19 towards Malaysia key economic indicator's performance using univariate regression analysis based on daily time series data from 1 January 2020 to 30 September 2020. Besides, this paper is also forecasting the upcoming three months of Malaysia's key economic indicator performance from October to December 2020, by using linear trend forecasting model. The results indicate that COVID-19 significantly impacted the unemployment rate, gross domestic product (GDP), consumer price index (CPI), foreign exchange rate (FOREX), and stock market index performance in Malaysia. The results of projecting the upcoming three months trends were forecasted to increase unemployment, GDP, FOREX, and stock market index performance. Instead, the CPI is expected to decrease. Furthermore, this paper provides four contributions in the later section

Asymmetric effects of third-country exchange rate risk: A Markov switching approach

[eng] The standard tourism demand models consider the effects of the bilateral real exchange rate between origin and destination in a linear context. Our study contributes to the literature by incorporating the asymmetric effects of real exchange rate volatility of home and third-countries. We propose a Markov Switching ARDL model to estimate outbound tourism demand over the period of 2002-2019. This model allows us to examine both the short- and long-run effects in the likely presence of asymmetric effects and structural breaks. The results reveal that there are nonlinear asymmetric long- and short-run effects of the third-countries exchange rate volatility. We also identify relevant structural changes coinciding with major events