The main aim of this study is to investigate whether market reacts asymmetrically to the issuance of selected Sukuk in Malaysia for the period 2009-2011. 45 companies are selected and data on the date of issuance, issuers, issue size in million and tenors in years for each group are collected from the Securities Commission Malaysia (SC) and Bloomberg database. The study employs event study methodology using cumulative average abnormal return (CAAR) on all symmetric and asymmetric events of [0,0] 1-day, [-1,+1] 3-day, [-2, +2] 5-day, [-5,+5] 11-day, [-1,+2] 4-day, [-2,+1] 4-day, [-2,+5] 8-day, [-5,+2] 8-day, [-15,+5] 21-day, [-5,+30] 36-day, [-30,+60] 91-day, [-60,+30] 91-day and [-90,+15] 106-day based on the reaction of the FTSE Hijrah Shari’ah Index and Dow Jones Islamic Market Index (DJIM) to the announcement of Sukuk issuance. The findings would be useful to Sukuk issuers and decision-makers to ensure the stability of the Islamic capital market and sustainable economic growth. Keywords:asymmetric, CAAR, Dow Jones Islamic Index, event-study, FTSE Hijrah Shari’ah Index, Sukuk, symmetric.

Market efficiency in capital markets is used to explain the degree to which prices reflect all available and relevant information about the fundamental value of the securities to help investors make informed decisions. Sukuk are priced according to the value of the assets backing them. The aim of the paper is to measure market efficiency of three Malaysian sukuk indices namely Bloomberg AIBIM Bursa Malaysia Corporate Sukuk Index (AIBIM), Bloomberg Malaysian Sukuk Ex-MYR Index (EXMYR) and Malaysian Foreign Currency Sukuk Index (MFCSUKUK). Daily returns of the three sukuk indices are collected for the period of 2010 until 2015. The efficiency was measured using GARCH-in-Mean (GARCH-M) estimation to identify different types of sukuk market efficiency. The findings indicate that EX-MYR and MFCSUKUK indices display weak form efficient market behaviour while AIBIM falls under the inefficient category. The inefficient market signals that all public information might not be fully reflected in the price, hence there is room for bargaining process or prices could be under or over-valued. For industry players, sukuk structural inefficiencies and sectorial mispricing behavior create investment opportunities due to possible existence of excess profit. For policy makers, an extreme case of inefficient market leads to market failure and welfare loss.

The aim of this study is to investigate stock market reactions to the announcements of sukuk issuance in Malaysia for the period of study, 2004 to 2011 using 50 listed companies. This research also aims to identify the structure, amount, tenure, sector and rating of sukuk issuance in Malaysia that were least affected during the 2008 global financial crisis. It is also important to examine the confidence effects among sukuk investors in Malaysia. The study uses cumulative average abnormal return (CAAR) to check the reactions with a three year estimation period. 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 Shari’ah Index (FBM EMAS), FTSE Bursa Malaysia Hijrah Shari’ah Index (FBM HIJRAH) and Dow Jones Islamic Market (DJIM). The sources of data come from Datastream, Bloomberg database, Securities Commission Malaysia and Bursa Malaysia. This research examines symmetric and asymmetric event windows to check the market efficiency. In relation to the first objective of this research, the findings show that the markets reacted positively before the crisis, and negatively and significantly both during and after the crisis. Addressing the second objective, the results suggest the best structure is Musyarakah; the best rating is the excellent rating; the best amount range is in RM10.1- 50 million; the best sector is the services sector and the best tenure range is 5.01- 10 years. The researcher advices policy makers to guide regulators, investors and issuers to the best sukuk that remained stable during a crisis.With respect to the third objective, sukuk investors did not display high risk-seeking behavior before the 2008 crisis. This analysis will provide valuable information and guidelines to issuers, policy makers, regulatory bodies and investors to Islamic bonds.

The sukuk market in the Islamic capital market has undergone significant evolution and development. During the 2008 global financial crisis, the deteriorating economic condition of countries, especially Malaysia as the biggest sukuk market in the world, adversely affected the value of sukuk investments. The decrease of 33 per cent in total global sukuk issuance after the 2008 crisis generated a complicated situation among sukuk investors (classified sukuk as a risky investment), then increased the number of sukuk defaults. The high volatility affected long-term efficiency. The daily data of all indices are collected from Dow Jones Sukuk Indices (1-3years, 3-5 years, 5-7 years, and 7-10 years). This research investigates the types of sukuk market efficiency before, during and after the 2008 global financial crisis utilising the GARCH-in-Mean (GARCH-M) model. The analyses are based on the Efficient Market Hypothesis (EMH) and the Random Walk model. The results conclude that the sukuk index with a long-term tenure (DJSUK10TR) is the best market performance analysis. Overall, the sukuk market record as an inefficient market. In short, the findings will provide valuable information, guidelines and give confidence to issuers, policymakers, regulatory bodies, and investors to invest in and issue sukuk. The empirical contributions in this study show the importance of sukuk to encourage investors to invest in sukuk to increase economic growth and investment.