Impact of Oil prices on Sukuk and Conventional Bond Issuance in Malaysia

By

ACKNOWLEDGEMENT

My thanks go out to all who have helped me complete this study and with whom this project may have not been possible. In particular, my gratitude goes out to friends, facilitator and family for extensive and helpful comments on early drafts. I am also deeply indebted to the authors who have shared my interest and preceded me. Their works provided me with a host of information to learn from and build upon, also served as examples to emulate.

DECLARATION

I, (Your name), would like to declare that all contents included in this thesis/dissertation stand for my individual work without any aid, and this thesis/dissertation has not been submitted for any examination at academic as well as professional level previously. It is also representing my very own views and not essentially which are associated with university.

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ABSTRACT

This research study is attempt test the impact that oil prices have on the issuance of sukuk and the issuance of conventional bonds in Malaysian capital market. Sukuk has become a part and parcel of the Malaysian capital market ever since the first issuance in 1990 by Shell MDS amounting to $33 million. With more than 20 years of experience of issuing sukuks and with strong incentives from the Malaysian government to make Malaysia the centre for Islamic Finance in the world, the growth has been seen to be astronomical in terms of issuances seen per year. This research study has adopted a secondary quantitative method of research. The data for oil price levels and issuance of conventional bonds and Islamic bonds (sukuk) have been extracted through secondary sources of data. Correlation has been test for these three variables and t-test has also been applied in order to test the impact that oil price levels have on the issuance of Islamic bonds and conventional bonds in the Malaysian market. The results of the correlation analysis have shown that all three variables oil prices, issuance of conventional bonds and issuance of Islamic bonds are positively correlated to each other. The results of the regression analysis have also shown that there is significant impact that oil price levels have on the issuance of the conventional bonds and issuance of Islamic bonds (sukuk). The results of the t-test showed that the the significant value is less than 0.05, therefore, it can be said that the oil prices have a significant impact on the issuance of the conventional bond and the Islamic bonds.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 01: INTRODUCTION1

1.1 Introduction1

1.2 Background of the Study2

1.3 Rationale for the Study/Research Contributions3

1.4 Research Problem4

1.5 Research Aims and Objectives6

1.6 Research Questions6

1.7 Justification of the Study7

1.8 Scope and Limitations of the Study7

1.9 Organisation of Study8

CHAPTER 02: LITERATURE REVIEW9

2.1 Introduction9

2.2 Sukuk9

2.3 History of Sukuk11

2.4 Conventional Bonds15

2.5 Theoretical Framework15

2.6 Current Sukuk and Conventional Bond Market16

2.7 Levels of Oil Prices and the Sukuk Market in Malaysia20

2.8 Impact of Oil Prices on Sukuk and Conventional Bonds in the Malaysian Market23

2.9 Hypothesis Development26

CHAPTER 03: RESEARCH METHODOLOGY27

3.1 ...