Abstract

The recent global Covid-19 pandemic is resentfully affecting global financial markets which including both Islamic and conventional stock markets. This study conducted an empirical examination to investigate the extent to which Covid-19 result on both Islamic and conventional financial markets, particularly the interconnections within the market activities. Data were collected from several national sources from 6 June 2020 to 27 September 2022, in two main periods. The study determined wavelet correlations among different variables to examine the effects of the pandemic. The findingsshow that the number of Covid-19 deaths was a significant determinant factor within the Islamic stock markets, contrary to conventional stock markets. Moreover, the results showed a positive link between the number of Covid-19 deaths and the Morgan Stanley capital International (MSCI) emerging market Asia Islamic index and the MSCI emerging Asia index. The link between exchange rates and crude oil in MSCI Gulf Corporation Council (GCC) countries combined was uncertain. However, this had a weak effect on Islamic indices and a strong effect on conventional indices. These findings contribute to assisting both investors and the market in optimising investment and market strategies.

Β 

Keywords

  • Public Policy
  • Challenges
  • Implementation

References

  1. Al-Awadhi, A. M., Alsaifi, K., Al-Awadhi, A., & Alhammadi, S. (2020). Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns. Journal of Behavioral and Experimental Finance, 27, 100326.
  2. Aloui, S., Goutte, K., Guesmi, R., & Hchaichi, R. (2020). COVID 19’s impact on crude oil and natural gas. S&P G S Indexes SSRN Working Paper (3587740).
  3. Ashraf, B. N. (2020). Economic impact of government interventions during the COVID-19 pandemic: International evidence from financial markets. Behavioral Experimental Finance, volume27, September 2020, 100371.
  4. Baret, S. Celner Anna, O'Reilly Monica, and Shilling Mark (2020). COVID‐19 potential implications for the banking and capital market sector. Maintaining Business and Operational Resilience. London, England: Deloitte insights.
  5. Bekaert, G., Engstrom, E., & Ermolov, A. (2020). Aggregate demand and aggregate supply effects of COVID-19: A real-time analysis. Finance and Economics Discussion Series (2020 049). https://doi.org/10.17016/
  6. Chen, N., Liang, H. Y., & Yu, M. T. (2018). Asset diversification and bank performance: Evidence from three Asian countries with a dual banking system. Pac. Basin Finance, 52, 40–53.
  7. Goodell JW (2020) COVID-19 and finance: agendas for future research. Finance Res Lett 35:101512
  8. Erdoğan, S., Gedikli, A., & Cevik, E. I. (2020). The effects of the Covid-19 pandemic on conventional and Islamic stock markets in Turkey. Bilimname, 42, 89–110.
  9. Farooq, M., & Zaheer, S. (2015). Are Islamic banks more resilient during financial panics? Pacific Economic Review, 20, 101–124.
  10. Financial Stability Board. (2020, April). COVID-19 pandemic: Financial stability implications and policy measures taken. Financial Stability Board. https://www.fsb.org/2020/04/covid-19-pandemic-financialstability implications-and-policy-measures-taken/
  11. Grech, V., & Borg, M. (2020). Influenza vaccination in the COVID-19 era. Early Hum. Dev., 148, 105116.
  12. Hachicha, N., & Ben Amar, A. (2015). Does Islamic banks financing contribute to economic growth? The Malaysian case. International Journal of Islamic and Middle Eastern Journal of Finance and Management, 8, issue 3, 349-368
  13. Hasan, M. B., Mahi, M., Hassan, M. K., & Bhuiyan, A. B. (2021). Impact of COVID-19 pandemic on stock markets: Conventional vs. Islamic indices using wavelet-based multi-timescales analysis. The North American Journal of Economics and Finance, 58, 101504.
  14. Hassan, M. K., Rabbani, M. R., & Ali, M. A. M. (2020). Challenges for Islamic finance and banking in the post-COVID era and the role of Fintech. Journal of Economic Cooperation and Development, 3, 93–116.
  15. Hassan, M., & Dridi, J. (2010). The effects of the global crisis on Islamic and conventional banks: A comparative study. IMF Working Paper, WP/10/201.
  16. IFSB. (2019). Islamic financial services industry stability report. Retrieved from Kuala Lumpur www.ifsb.org
  17. In, F., & Kim, S. (2013). An introduction to wavelet theory in finance: A wavelet multiscale approach. World Scientific volume 12, page 212
  18. International monetary fund World Economic Outlook (2021)
  19. Le, T. D., Ho, T. H., Nguyen, D. T., & Ngo, T. (2022). A cross-country analysis on diversification, Sukuk investment, and the performance of Islamic banking systems under the COVID-19 pandemic. Heliyon Cell press Journal.Volume 8, Issue 3, March 2022, e09106
  20. Mansour, N. N., & Haron, R. (2021). The impact of COVID-19 pandemic on Islamic versus conventional stock markets: International evidence from financial markets. Nomran and Haron Futur Bus J, 7(1), 1–16.
  21. Mzoughi, H., Ben, A. A., Belaid, F., & Guesmi, K. (2022). The impact of COVID-19 pandemic on Islamic and conventional financial markets: International empirical evidence. Quarterly Review of Economics and Finance, 85, 303–325.
  22. Nagayev, R., Disli, M., Inghelbrecht, K., & Ng, A. (2016). On the dynamic links between commodities and Islamic equity. Energy Economics, 58, 125–140.
  23. OECD. (2020). The impact of the coronavirus (COVID-19) crisis on development finance. In Tackling coronavirus (COVID-19): Contributing to a global effort (issue 6). Wirtschaftsdienst volume 100, pages468–470https://doi.org/10.1007/s10273-020-2681-8
  24. Raza, R., Asad, M., Ali, M., Rahiman, H. U., Atif, M., Zulfikar, Z., & Naseem, Y. (2021). The response of Islamic financial service to the COVID-19 Pandemic: The open social innovation of the financial system. J. Open Innov. Technol. Mark. Complex, 7, 85.
  25. Sherif, M. (2020). The impact of the coronavirus (COVID-19) outbreak on faith-based investments: An original analysis. J. Behav Exp Finance, 28, 100403.
  26. Saiti, B., Bacha, O. I., & Masih, M. (2014). The diversification benefits from Islamic investment during the financial turmoil: The case for the US-based equity investors. Borsa Istanbul Rev, 14(4), 196–211.
  27. Teerawattananon, Y., & Dabak, S. V. (2020). COVID vaccination logistics: Five steps to take now. Nature, 587, 194–196.
  28. ISDB. (2020). Islamic development bank The Covid-19 crisis and Islamic finance: Response to the Islamic development bank group (2020). A discussion draft.
  29. Tibrizi, A., & Wicaksono, S. (2022). Islamic bank deposits during COVID-19 Pandemic: A spatial finance approach. Journal of Ekonomi Malaysia, 56(1), 135–149.
  30. Torrence, C., & Compo, G. P. (1998). A practical guide to wavelet analysis. Bulletin of the American Meteorological Society, 79(1), 61–78.