FTSE Bursa Malaysia Kuala Lumpur Research Articles

Determinants of Malaysian Real Estate Investment Trusts (M-REITs) Risk-Adjusted Performance during the Period of Property Oversupply

After the remarkable property surge in the first half of 2010s decade (2010-2014), the Malaysian property market has then moved into a period of oversupply and price overhang, which pose more challenges for REIT managers. Unlike most previous research that mainly compared various risk-adjusted performance measures among REITs, this research looks into whether size of portfolio, fundamental performance measures (net property income and dividend yield) and types of property managed by REITs influence their risk-adjusted performance measure of Jensen alpha. Based on a sample of 16 Malaysian REITs over the period 2015-2017, regression results generally show that there is no significant relationship between any of these determinants and Jensen alpha. Furthermore, only one out of the 16 M-REITs has a positive Jensen alpha and outperforms the benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index. Investors who prefer a high and certain dividend yield can consider to invest in M-REITs that mainly focused in the hospitality sector. Based on the rankings of Jensen alpha, M-REIT fund managers can consider to diversify their property portfolios to include more retail and hospitality properties during the period of property oversupply.

The Determinants of Gold Price in Malaysia

The purpose of this paper is to look into the linkage between inflation rate, exchange rate, stock market return with price of gold. The sample collected for this empirical study covered 30 years of data from 1991 to 2020. The secondary data was collected annually and total 30 observations are taken for each variable. Multiple Linear Regression model is developed to find out the linkage between variables chosen with gold prices. The independent variables included Inflation rate (Consumer Price Index), exchange rate (Malaysia to USD), stock market return (FTSE Bursa Malaysia Kuala Lumpur Composite Index) and dependent variable is Price of Gold. Besides that, several tests are used including Unit Root Test (Augmented Dickey-Fuller Test), Jarque-Bera Normality Test, Breusch-Godfrey Serial Correlation LM Test, Heteroscedasticity-White Test, Ramsey Regression Equation Specification Error (RESET) Test and Granger Causality Test. The time series analysis used as the methodology by using Eview 11 to proceed all the test. The result showed that inflation rate and exchange rate have strong positive link to gold price while stock market return does not have significant relationship with gold price. In summary, this research can provide reference for other investors.

Stock Market Reactions on Shariah Indices Following Sukuk Issuances: CAAR Analysis on 2008-Financial Crisis

The purpose of this study is to look at how stock markets in Malaysia reacted to sukuk issuance announcements from 2004 to the post-2008 financial crisis by examining 50 selected companies listed in The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBMKLCI), FTSE Bursa Malaysia Emas Shari’ah Index (FBM EMAS), FTSE Bursa Malaysia Hijrah Shari’ah Index (FBM HIJRAH), and Dow Jones Islamic Market Index (DJIM). The data gathered from Datastream, Bloomberg, the Securities Commission Malaysia, and the Bursa Malaysia stock exchange were used to compile this study. A three-year estimation period to investigate market reactions using cumulative average abnormal return (CAAR) was adopted in this study. To investigate market efficiency, this study looked at symmetric and asymmetric event windows. This study discovers that markets responded favourably before the crisis but negatively and significantly during and after the crisis. The findings of this study provide advice to policymakers on how to direct regulators, investors, and issuers to the most stable sukuk during a crisis, as well as useful information and suggestions to issuers, policymakers, regulatory organisations, and investors in Islamic bonds.

Impact of COVID-19 on the Co-Movement of Cryptocurrencies and Financial Assets: Evidence from Malaysia

Due to the significant increase in novel coronavirus disease (COVID-19) cases in Malaysia, this study took the initiative to examine the impact of COVID-19 on the co-movement of five selected cryptocurrencies and two financial assets, namely FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBMKLCI) and Ringgit Malaysia over United States Dollar (MYRUSD). By using the daily frequency data from May 2013 to July 2021, the Dynamic Conditional Correlation of Multivariate GARCH (MGARCH-DCC) was applied to examine the time-varying conditional correlation of these financial assets as it could determine the co-movement of the assets. Then, independent t-test and non-parametric Mann-Whitney U test were utilised to examine the conditional correlation difference from the pre-COVID-19 pandemic and during the COVID-19 pandemic period. The results of the independent t-test and Mann-Whitney U test proved that the co-movements of the cryptocurrencies and FBMKLCI and MYRUSD had significant differences after the COVID-19 pandemic outbreak in Malaysia. This implied that co-movement between the cryptocurrencies and FBMKLCI and MYRUSD was impacted by the COVID-19 pandemic as it was strengthened during the COVID-19 pandemic period, except for Binance and Cardano with FBMKLCI, which showed a weakened co-movement during the COVID-19 pandemic period. These findings provided a crucial implication for all stakeholders as the findings could be used as guidance in reallocating the investment portfolio, especially during the COVID-19 pandemic period.

Intertemporal price discovery between stock index futures and spot markets: New evidence from high‐frequency data

AbstractThis article utilizes high‐frequency 15‐s intraday data from September 2017 through to August 2018 to investigate price leadership dynamics between Kuala Lumpur index futures (FKLI) and its underlying spot market: FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) in Bursa Malaysia. Harnessing the explanatory powers of Wavelet analysis, we employ Maximal Overlap Discrete Wavelet Transform to evaluate interdependence between contemporaneous futures and spot returns. We observe that price discovery between futures and spot markets at granular level is a scale‐dependent phenomenon. Moreover, we record a counter‐intuitive but not unprecedented evidence of futures market lagging the spot market in price formation. This discrepancy approaches convergence in 1–8 min. Our findings constitute evidence against the efficient market hypothesis and hint at opportunities for statistical arbitrage by high‐frequency trading. The results from time‐frequency domain receive strong support from vector error correction robustness checks, though corroboration is less conclusive from DCC‐GARCH and Baba, Engle, Kraft, and Kroner‐GARCH results.

CO-MOVEMENT AND CAUSAL RELATIONSHIP BETWEEN STOCK MARKET AND MACROECONOMIC VARIABLES: LATEST EVIDENCE FROM MALAYSIA

Previous studies pertaining to the co-movement and causal relationship between Malaysian stock markets and domestic macroeconomic variables are by now quite well documented. Nonetheless, to the best of authors’ knowledge, there is a void in the literature about foreign macroeconomic variables. Therefore, this paper aims to examine co-movement and causal relationship between FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBMKLCI) with foreign macroeconomic variables namely world crude oil price, gold price, and five world major stock market indices; Singapore’s Straits Times Index (STI), Chinese Shanghai A-Share Index (SHAI), the US’s Dow Jones Industrial Average (DJIA), Hong Kong’s Hang Seng Index (HSI) and Japanese Nikkei 225 Index (NIK). We also include domestic macroeconomic variables namely private sector domestic credit, gross international reserves and foreign currency assets, and an exchange rate of Malaysian ringgit (MYR) to the US dollar (USD) in this study. Using 9-year monthly data series from 2010 to 2018, the Augmented Dickey-Fuller (ADF) test reveals that data series have unit root in level order, but become integrated when converted into the first difference. The t-statistics of the Trace test suggests that FBMKLCI co-moves with Malaysian gross international reserves and foreign currency assets, world gold price and STI in the long run, respectively. Further, the VECM notes the absence of long-run or short runs causal relationships except Singapore’s STI to FBMKLCI in the short run. The pairwise Granger causality test indicates a one-way causal relationship running from FBMKLCI to gross international reserves and foreign currency assets. The findings benefit stock market investors, diversified portfolio fund managers, market regulators, and policymakers besides enriching the existing literature.

Variance Targeting Estimator for GJR-GARCH under Model’s Misspecification

The application of the Variance Targeting Estimator (VTE) is considered in GJR-GARCH(1,1) model, under three misspecification scenarios, which are, model misspecification, initial parameters misspecification and innovation distribution assumption misspecification. A simulation study has been performed to evaluate the performance of VTE compared to commonly used, which is the Quasi Maximum Likelihood Estimator (QMLE). The data has been simulated under GJR-GARCH(1,1) process with initial parameters ω = 0.1, α = 0.05, β = 0.85, γ = 0.1 and an innovation with a true normal distribution. Three misspecification innovation assumptions, which are normal distribution, Student-t distribution and the GED distribution have been used. Meanwhile, for the misspecified initial parameters, the first initial parameters have been setup as ω = 1, α = 0, β = 0 and γ = 0. Furthermore, the application of VTE as an estimator has also been evaluated under real data sets and three selected indices, which are the FTSE Bursa Malaysia Kuala Lumpur Index (FBMKLCI), the Singapore Straits Time Index (STI) and the Jakarta Composite Index (JCI). Based on the results, VTE has performed very well compared to QMLE under both simulation and the applications of real data sets, which can be considered as an alternative estimator when performing GARCH model, especially the GJR-GARCH.

Information Spillover Between Crude Oil and Stock Markets: Evidence from Subsidy Cut for RON95 Fuel Price in Malaysia

Malaysia has been enjoying fixed retail prices for research octane number (RON) 95 petrol and diesel as a form of subsidy from the government since 1983. As of December 2014, the pricing of RON95 and diesel officially went on a managed float mechanism. Therefore, this study examines how information on oil shocks is transmitted to FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) upon the announcement of subsidy cut for RON95 fuel price on 2 October 2014. The sample period of September 2013–December 2014 is separated into the pre-announcement (3 September 2013–1 October 2014) and post-announcement (2 October 2014–28 November 2014) periods. Using the forecast error variance decomposition, the results indicate that Brent crude oil prices dominate information spillover during the post-announcement period. From the perspective of investors’ behaviour, this study suggests that investors’ sensitivity towards information on oil price is elevated by the announcement of subsidy cut and steers their consciousness towards information on oil prices in making decisions.

The impact of derivatives on Malaysian stock market

The essential of derivatives has been discovered by researchers over recent decade. However, the conclusions made regarding the impact of derivatives on stock market volatility remains debatable. The main objective of this study is to examine the impact of derivatives on Malaysian stock market volatility by exploring FTSE Bursa Malaysia Kuala Lumpur Composite Index Futures (BMD FKLI) using FBM KLCI as the underlying asset. Generalized Autoregressive Conditional Heteroskedasticity (GARCH) (1, 1) model was employed to realize the objective. The results have shown that the introduction of futures trading has decreased the volatility of Malaysian stock market. The volatility increased vigorously during the Asian financial crisis compared to the Global financial crisis. However, the role of futures as a risk transfer is agreed as it could improve the market by decreasing the volatility in the spot market.

The Relationship between Macroeconomic Variables and FTSE Bursa Malaysia Kuala Lumpur Composite Index

This study aims to examine the relationship between top ten constituents in FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) with a set of macroeconomic variables and industrial production using Johansen co-integration test. This study also analyzes the respond of each macroeconomic variable on the stock indices using Impulse Response Function (IRF) and forecast error decomposition. The findings show a long-run relationship between each stock index in FBM KLCI with macroeconomic variables and that the shocks of stock indices on its own shock contribute the largest portion followed by money supply. In addition, we apply GARCH (1, 1) model to determine which macroeconomic affects volatility of stock indices. The result shows that macroeconomic volatility does not affect much on Genting and IHH Healthcare, but Public Bank Bhd, Tenaga Nasional, Malayan Banking, CIMB Group Holdings, Axiata Group Bhd, Petronas Chemicals Group Bhd are affected by the volatility of macroeconomic variables.

Stock price and volume effects associated with changes in the composition of the FTSE Bursa Malaysian KLCI

We examine the stock price and volume effects associated with changes in the composition of the FTSE Bursa Malaysia Kuala Lumpur Composite Index (KLCI), over the time period of 2005–2012. We find evidence to support the price pressure hypothesis for both additions to and deletions from the KLCI. This is because significant stock price and trading volume effects in the pre index revision period are entirely reversed after the announcement of the news. Our empirical findings can be explained by the market microstructure literature. Significant changes in liquidity cause trading volume and stock prices to reverse back to their original level before the index revisions took place.

Stock Price and Volume Effects Associated with Changes in the Composition of the FTSE Bursa Malaysian KLCI

We examine the stock price and volume effects of changes in the composition of the FTSE Bursa Malaysia Kuala Lumpur Composite Index (KLCI), over the time period of 2005 to 2012. We find evidence to support the price pressure hypothesis for both additions to and deletions from the KLCI. This is because substantial stock price and trading volume effects in the pre index revision period are entirely reversed after the announcement of the news. Significant changes in liquidity causes trading volume and stock prices to reverse back to their original level before the index revisions took place.

Bivariate Value-at-risk in the emerging Malaysian sectoral markets

This study examines the transmission of price changes and volatility among the Malaysian economic barometer (FTSE Bursa Malaysia Kuala Lumpur Composite Index- FBMKLCI) and four sectoral markets after the Asian financial crisis. The preliminary structural break identification provides an optimal sample size for the cross-markets transmission mechanism analysis. In order to reveal the hidden intention of interactions among the sectoral markets, the pair-wise markets which consist of CI-IND, CI-PLN, CI-PRP and CI-FIN are evaluated using a bivariate asymmetric BEKK model. The major intention of this study focuses on the cross-market hedging and market risk evaluations in terms of shocks and volatility.