Stock Market Reactions on Sukuk Issuance in Malaysia Based on Tenures

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1. IOSR Journal of Economics and Finance (IOSR-JEF) e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 7, Issue 3. Ver. II (May. - Jun. 2016), PP 83-89 www.iosrjournals.org Investigating Stock Market Reactions on Sukuk Issuance in Malaysia Based on Tenures Syazwani Abd Rahim1, Nursilah Ahmad2 1,2 (Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia) Abstract: The aim of the paper is to examine whether different tenure announcements on sukuk issuance carry any new information to market for the period 2004-2011 in Malaysia. Data are collected from the Securities Commission Malaysia (SC) and Bloomberg database. Sukuk are different at tenures that categorized into ranges 1-5 years, 5.01-10 years and 10.01-15 years. The study employs event study methodology using cumulative average abnormal return (CAAR) on symmetric and asymmetric events based on the reaction of the FTSE Kuala Lumpur Composite Index (FTSEKLCI) to the announcement of sukuk issuance. The results showed that the moderate tenure was not affected too much during the crisis. In conclusion, this study suggests the tenure of 5.01 – 10 years is the best tenure for sukuk issuances. The findings would be useful to issuers, investors and decision-makers in assessing the credit risk of sukuk issuance. Keywords: Sukuk tenures, event study, asymmetric, CAAR, stock market I. Introduction Malaysia was the largest market for sukuk raising USD5.5billion from 54 issues during 2008 [1]. However, during the 2008 financial crisis, the global amount of sukuk issuance decreased sharply by 54.5 percent to reach USD15.1 billion, as compared to USD33.1 billion in 2007. The decline in sukuk issuance was due to the credit crunch that forced investors to step aside from the money markets, hence exhausting resources for sukuk as well. The number of global sukuk issuance had weakened in the first half of 2008 and remained lower than the 2007 record. Despite the decline, the prospects for the sukuk market were still positive because of the existing demand. Sukuk is defined as “certificates of equal value which evidence undivided ownership or investment in the assets using Shari‟ah principles and concepts approved by the Shari‟ah Advisory Council (SAC)”[2]. Sukuk has developed into one of the most significant mechanisms to raise funds from the market using Islamic guidelines. Sukuk also appeals to conventional investors looking for sukuk that provide the possibility of increasing an original asset and thus the value of the sukuk themselves, while the original debt in bonds cannot be increased [3]. Looking at both the increasing expectation of this industry and the growing investor base, the study will investigate the performance of the sukuk industry from 2004 to 2011 in Malaysia. Thus, this paper examines whether different tenures of sukuk issuance announcements contain pricing relevant information for sukuk. This is motivated by three key factors affecting the sukuk market. First, the industry regained market confidence after the restructuring of the higher profile sukuk default in Dubai after the 2008 financial crisis. Second, investors are avoiding the riskiest markets of the United States and Europe. Third, positive economic growth and favorable debt dynamics in the two most important sukuk issuing regions of the Gulf and Malaysia has attracted investors to the Islamic capital market [4]. The paper contributes to the literature since the empirical work on sukuk issues by sectors is relatively few. The remainder of the paper is organized as follows. Section II discusses the related literature review. Section III discusses the theoretical framework. Section IV highlights the research methodology. Section V discusses the findings and the final section concludes the paper. II. Literature Review A. Sukuk Development In Malaysia Sukuk started in Malaysia in 1990 and spread in the world rapidly [5]. The Malaysian sukuk market took off in 1990, when the world‟s first sukuk, RM125 million of al-Bai‟ Bithaman Ajil, was issued by a nonIslamic corporation, Shell MDS. In 2002, Malaysia achieved another significant milestone when the government issued the first global sovereign sukuk, raising USD600 million of 5-year Islamic bonds based on the ijarah concept. This issuance was listed on the Luxembourg Stock Exchange [6]. Table 1 shows the world‟s first sukuk issues from 1990 to 2010. DOI: 10.9790/5933-0703028389 www.iosrjournals.org 83 | Page
2. Investigating Stock Market Reactions on Sukuk Issuance in Malaysia Based on Tenures Table 1 : Global World‟s First Sukuk Issues Year Issuer Shell MDS (Bai‟ Bithaman Ajil) Kumpulan Guthrie (Ijarah) Government of Malaysia (Ijarah) International Finance Corporation Highlight Feature World‟s first Ringgit Sukuk issued by a foreign-owned, nonIslamic company World‟s first global corporate Sukuk Amount (million) RM125 (USD33) USD150 World‟s first global sovereign Sukuk USD600 2004 Cagamas MBS World‟s first Islamic residential mortgage-backed securities 2005 PLUS Complex and innovative structure, conversion of PLUS‟s existing debts into Islamic finance RM500 (USD132) RM2, 050 (USD$540) RM9, 170 (USD2860) 2006 Khazanah Nasional (Rafflesia Capital) World‟s first exchangeable Sukuk USD750 2007 AEON Credit Services First Sukuk issued by a Japanese - owned company RM400 (USD125) Nucleus Avenue (Malakoff Corp) Khazanah Nasional (Cherating Capital) Maybank World‟s first hybrid Sukuk RM8,000 (USD2500) Largest equity-linked Sukuk issue and highest over subscription rate The first international subordinated Sukuk 2007 Binariang GSM World‟s largest Sukuk issue (at the time of issuance) 2010 2010 Government of Malaysia Nomura 2010 Khazanah Nasional World‟s largest global sovereign Sukuk First Japanese global Emas sukuk The largest and longest termed Singapore dollar denominated 'Emas' sukuk USD300 RM15, 350 (USD4, 800) USD1, 250 USD100 SGD1.5 billion (RM3.6 billion) 2010 Islamic Development Bank First Emas sukuk by a multilateral development institution. USD500 Khazanah Nasional World's first China renminbi denominated 'Emas' sukuk, World's First Offshore RMB sukuk World's single largest sukuk issuance 1990 2001 2002 2003 2007 2007 2007 2011 2012 PLUS Khazanah Nasional 2012 First Ringgit Sukuk issued by a supranational agency Exchangeable sukuk that was first to be priced at negative yield and first Malaysian equity-linked deal since 2010 USD850 RMB500 (RM246) RM30.6 billion USD357.8 Sources: Securities Commission Malaysia 2012 The global sukuk market experienced a challenging year in 2009, with USD 19 billion (RM63 billion) new issuances, down from a record USD 33 billion (RM109 billion) issuances in 2007. This was because the market faced a liquidity crunch from the global financial crisis and the debate on the compliance of some of the sukuk structures with Islamic law. Despite the challenging market environment, Malaysia continued to be the top world issuer [7]. Table 2 below shows global sukuk new issuance. Table 2: Global Sukuk New Issuance for Second Quarter in 2011 Country Malaysia Bahrain Indonesia Qatar Saudi Arabia UAE Others Total Q2 2011 (Amount in USD Billion) 31.50 0.90 1.70 9.10 0.30 0.00 2.60 46.10 Percentage (%) 68.3 2.0 3.7 19.7 0.7 0.0 5.6 100.0 Source: Bloomberg B. Stock Market Reactions to Sukuk Issuance Many studies have been conducted to examine market participants‟ reactions to bond announcements and their impact on firm value. A considerable amount of literature so far has focused on the group of bonds carrying special features of having both equity and bond components. A noteworthy first finding who recorded the absence of any significant reaction of the stock markets to conventional bond announcements [8]. This was evidence that stock markets do not react to debt announcements, including bond issuances, even if some studies also found support for a negative reaction [9]. The reaction of stock markets to the issue of bonds was affected by opposing influences. The event studies were frequently used to test market efficiency [9]. An event study was a statistical method used to gauge the impact of a corporate event, such as stock splits, earnings announcements and DOI: 10.9790/5933-0703028389 www.iosrjournals.org 84 | Page
3. Investigating Stock Market Reactions on Sukuk Issuance in Malaysia Based on Tenures acquisition announcements . Several studies for the United States market documented a significantly negative (on average –1.5 percent) market response to convertible bond issues, confirming the hybrid nature of these financial instruments. The announcement effect of different corporate securities has been the subject of numerous studies, such as [8] for equity, [10] for bonds, and [11] for convertible securities. Furthermore, these results supported the models proposed by [12]. Recent studies, for example, the market reaction was significantly positive during event windows [-3, 0] and [-3, 3] during the announcements of Islamic debt issuance for the period 2000 to 2006 in Malaysia [13]. The wealth effect of Islamic bond issuance announcements was positively influenced by the issuer‟s investment opportunity and negatively influenced by the size of the issue, the size of the firm and whether the announcement was accompanied by the Securities Commission (SC) approval. There was a wealth effect of the announcement of Islamic bonds issued for the period 2001 to 2006 in Malaysia [14]. This early market reaction to Islamic bond announcements found that the early market reaction was positive. Regardless of the reaction kind (positive or negative), a possible reason for the early response could be the fact that information of Islamic bond offerings often leaks out to the market before the announcement. A study found significant negative abnormal returns near the announcement days in Malaysia over the period of 2001 to 2007 [15]. They found that the average abnormal return of the subordinated bonds was significantly positive compared to other types of bonds. Besides, a research found a significant positive market reaction just prior to a firms‟ positive surprise earnings announcements [16]. When a firm announced positive surprise earnings, investors appeared to perceive a positive signal about the firm‟s future, which caused an increase in the firm‟s stock price. Positive surprise earnings announcements did indeed send a positive signal about the profitability and future success of a firm. By doing so, stock prices did increase and the market reacted quickly to available information. According to [5], a significant negative abnormal return occurred one day before the announcement date in a sample of 45 listed companies on Bursa Malaysia involved in the issuing of Islamic debts during 2005 to 2008. The event window was -15 to +15 days around the announcement date (22 working days). The negative abnormal return of the day before the announcement was highly significant at the five percent level and insignificant on day +1. Significant negative abnormal return of the day before showed that the announcement of Islamic bonds in the market was a reflection of bad news during the years 2005 to 2008 in the Malaysian market. III. Theoretical Framework Event Studies Theory Event studies are an important tool in finance, which concern with the valuation of firms and the changes in firm value resulting from, for example, changes in capital structure. In general, the value of a firm is difficult to measure. However, if there is an efficient market for the firm‟s stock, the impact of decisions of this type can be measured by the change in the stock price around the time when the decision becomes public knowledge. Although such events can be studied in many different ways, the empirical finance literature has taken a particular approach based on statistical tests of the significance of abnormal stock returns around event dates. Figure 1 shows the reaction of stock prices in the stock market to news around the events. Fig. 1: Reaction of stock prices to news. Source:Frederic S. Mishkin 2001[17] In an event study, it is important to test for any evidence of (1) under reaction, (2) overreaction, (3) early reaction, or (4) delayed reaction around the event. If the market is “semi-strong-form efficient”, the effects of an event will be reflected immediately in the security prices. Thus, a measure of the event‟s economic impact DOI: 10.9790/5933-0703028389 www.iosrjournals.org 85 | Page
4. Investigating Stock Market Reactions on Sukuk Issuance in Malaysia Based on Tenures can be constructed using the security prices that are observed over a relatively short time period (Frederic S. Mishkin, 2001). The efficient markets hypothesis (EMH) can be distinguished depending on the level of available information: (1) weak form EMH, (2) semi-strong form EMH and (3) strong form EMH. The weak form EMH states that current asset prices already reflect past prices and volume information. The information contained in the past sequence of prices of a security is fully reflected in the current market price of that security. It is named weak form EMH because the security prices are the most publicly and easily accessible information. In comparison, the semi strong form EMH states that all publicly available information is already incorporated in the asset prices. Finally, the strong form EMH stipulates that private information or insider information is quickly incorporated in the market prices. IV. Research Methodology A. Sample and Data Collection The sample period (2004−2011) contains 1,582 events of sukuk issuances in Malaysia. The sukuk issuances are collected and separated by tenures. The tenures are categorized into ranges 1-5 years, 5.01-10 years and 10.01-15 years. The estimation period for the study is from 2001 to 2003 based on FTSEKLCI as a proxy data on closing prices from FTSEKLCI are collected based on daily date from the DataStream database for the period 2004 to 2011. The Kuala Lumpur Stock Exchange Composite Index is a broad based capitalization weighted index of 100 stocks designed to measure the performance of the Kuala Lumpur Stock Exchange. Among the objectives of the KLCI are: (1) to provide a performance benchmark for the Malaysian equity market; (2) to reflect the performance of those listed companies are representative of the major sectors as in the Malaysian economy; and (3) to reflect the growth and development in Malaysian corporate and economic sector. B. Method For the purpose of the study, the market is hypothesized to react positively to the announcement of sukuk issues. This is due to firstly, cheaper financing costs since sukuk has higher liquidity due to a wider investor base encompassing of both Muslims and conventional investors. Second, there is higher demand for Shariah compliant stocks since 85 percent of total securities listed on Bursa Malaysia are Shariah compliant. Third, funds raised from the Islamic debt instruments are used to finance new activities (Ibrahim and Minai, 2009). The performance of stock prices of firms on certain days is measured using (1): ARit  Rit  ( it   i Rmt ) Where; (1) ARit  Abnormal returns for firm i at time period t Rit  Actual returns for firm i at time period t Rm t  Returns on market portfolio in period t  i  The constant average returns of stock i  i  Beta estimate of stock  and β are estimated using market model which relates the given sukuk to the return of the market portfolio. The returns of the FTSE Kuala Lumpur Composite Index are used as a proxy of market returns. They are calculated by running regression of sukuk returns against the market returns. After estimating the abnormal returns for each firm, the abnormal return for all of the firms on each day of the event window are then aggregated and averaged as (2); where N is equal to the number of firms in the sample: AAR t  1 N N  AR t 1 (2) it The t-test for AARt is estimated as (3) t-test = CAAR /  (CAAR) where; (3) AARt = Average abnormal return of period t  = Standard deviation of average abnormal return over the estimation window. DOI: 10.9790/5933-0703028389 www.iosrjournals.org 86 | Page
5. Investigating Stock Market Reactions on Sukuk Issuance in Malaysia Based on Tenures To observe the cumulative effects , the cumulative abnormal returns (CAARt,+t2) are computed as (4) below: t 2 CAAR  t 1,  t 2    AAR (4) t1 CAARt is a more precise representative of the long term effect on share prices from bond offering announcements. The standard deviation of CAAR is defined as (5); where N is the number of days in the CAAR statistics:  (CAAR)   ( AAR ) N V. (5) Findings And Discussion Before the crisis, the market showed negative reactions in short term events, but positive reactions in long term events within 1 – 5 years after the sukuk announcement. These results show the high confidence among investors to invest in sukuk for this tenure. The maximum CAAR was on [-10,+20] and the minimum CAAR was on [-20,+40]. During the crisis, the market reacted negatively in all events with the maximum CAAR on the symmetric event [-3,+3] and the minimum CAAR on the asymmetric event [-5,+3]. These results show that early reactions after the announcement were negative as reactions were affected by negative information. The investors reacted to avoid risk. After the crisis, the market showed that all events reacted negatively and 13 events had negative and significant results. The maximum CAAR after the crisis was on the short symmetric event [-1,+1] and the minimum CAAR was on the long asymmetric event [-40,+20]. These results show the strong impact of the crisis on the market after the issuances. This short tenure of within five years shows that although the number of issuances decreased during the crisis, it increased after the crisis. This tenure shows the highest number of issuances after the crisis compared to the other tenures. Table 3 shows that the second sukuk tenure ranged from 5.01 – 10 years. Before the crisis, the market showed that the maximum CAAR was in [-30,+30]. But, the worst event was on [-20,+40]. Sukuk investment showed that the number of issuances during this tenure was the highest compared to the other tenures. These results show the strong confidence among sukuk investors to invest in sukuk. During the crisis, the market reacted negatively and significantly in short term events, but had positive and significant reactions for long term events. The maximum CAAR during the crisis showed that there was an overreaction of 0.1596 with 1% significant results. The minimum CAAR during the crisis was in [-5,+3]. The weak form efficiency caused the market to react slowly during the crisis. After the crisis, there was no negative and significant result. The maximum CAAR was on [-20,+40] and the minimum CAAR was on [-40,+20]. But, after the crisis, the number of issuances during this tenure decreased. These results show that the investors tried to avoid risks after the crisis to reduce the probability of sukuk default. The longest tenure was between 10.01 – 15 years. The market had positive and negative reactions before the crisis. The only event showing significant results was on the asymmetric event [-20,+10], at -0.0264 significance. The maximum CAAR before the crisis was on the asymmetric event [-7,+3] and the minimum CAAR before the crisis was on [-20,+40]. Table 5.17 also displays overreactions during the crisis with four events producing positive and significant results, but there was no negative with significant results. This tenure showed that the maximum CAAR was on [-40,+20] during the crisis while the minimum CAAR was on [-3,+7]. This tenure also showed that all events reacted positively after the crisis. After the crisis, the market indicated that the maximum CAAR was on [-20,+10] and the minimum CAAR was on [-2,+2]. The number of sukuk issuances during this tenure was the lowest compared to the other tenures, as investors reacted towards safety to avoid risks. DOI: 10.9790/5933-0703028389 www.iosrjournals.org 87 | Page
6. Investigating Stock Market Reactions on Sukuk Issuance in Malaysia Based on Tenures Table 3 : CAAR Estimations by Tenure, Based on FTSE KLCI No Event Window 1 [-1,+1] 2 [-2,+2] 3 [-3,+3] 4 [-7,+7] 5 [-15,+15] 6 [-30,+30] 7 [-1,+3] 8 [-3,+1] 9 [-2,+4] 10 [-4,+2] 11 [-3,+5] 12 [-5,+3] 13 [-3,+7] 14 [-7,+3] 15 [-4,+10] 16 [-10,+4] 17 [-10,+20] 18 [-20,+10] 19 [-20,+40] 20 [-40,+20] Types of Events Symmetric event windows Asymmetric event windows 20042006 Malaysian Sukuk Issuance by Tenure (2004-2011) Cumulative Average Abnormal Return (CAAR) 1 – 5 Years 5.01 - 10 Years 2007200920042007200920042008 2011 2006 2008 2011 2006 0.0004 .137 0.0008 .122 0.0228** 2.661 -0.0053 -.221 -0.0130 -.377 -0.0436 -.617 0.0203** 2.591 0.0029 .435 0.0050 .417 0.0126** 2.164 0.0060 .326 0.0259** 2.432 0.0079 .466 0.0096 .589 0.0043 .215 -0.0074 -.333 0.0286 .784 -0.0752 -1.322 -0.0819 -1.014 -0.0125 -.191 -0.0196** -2.119 -0.0215 -1.315 -0.0121 -.551 -0.0627 -1.467 -0.0267 -.392 -0.0247 -.352 -0.0135 -.740 -0.0181 -1.630 -0.0181 -1.011 -0.0134 -.784 -0.0123 -.619 -0.0755 -1.625 -0.0147 -.690 -0.0598 -1.353 -0.0469 -1.298 -0.0368 -.926 -0.0367 -.684 -0.0399 -.644 -0.0536 -.709 -0.0452 -.574 -0.0053* -1.790 -0.0086 -1.325 -0.0102 -1.485 -0.0201** -2.143 -0.0475*** -3.534 -0.0862*** -2.829 -0.0080 -1.198 -0.0075** -2.195 -0.0098 -1.376 -0.0145** -2.127 -0.0155** -2.117 -0.0107 -1.514 -0.0186** -2.471 -0.0117 -1.396 -0.0350*** -3.503 -0.0139 -1.547 -0.0606*** -4.328 -0.0413*** -3.125 -0.0628** -2.117 -0.1014*** -5.380 0.0039 1.165 -0.0053 -.944 -0.0030 -.484 -0.0136* -1.758 0.0033 .130 0.0254 .665 0.0032 .614 -0.0023 -.476 -0.0138* -1.799 -0.0141** -2.482 -0.0083 -1.305 -0.0144* -1.729 -0.0097 -1.312 -0.0070 -.940 -0.0227 -1.297 -0.0208** -2.315 0.0112 .388 -0.0344* -1.852 -0.0518 -1.163 0.0173 .527 -0.0067* -1.890 -0.0124* -1.719 -0.0208** -2.237 -0.0048 -.472 0.1242*** 3.780 0.0562 1.259 -0.0048 -.684 -0.0227*** -4.350 -0.0157* -1.894 -0.0213** -2.656 -0.0213** -2.397 -0.0346** -2.547 -0.0064 -.711 -0.0192* -1.798 -0.0181 -1.312 -0.0054 -.503 0.0619*** 2.916 0.0742** 2.315 0.0722** 2.222 0.1596*** 3.326 -0.0103 -1.667 -0.0015 -.200 0.0142 1.218 0.0294* 1.822 0.0272 1.250 -0.0174 -.481 -0.0001 -.010 0.0040 .452 0.0024 .266 0.0116 1.194 0.0095 .839 0.0128 1.072 0.0226 1.438 0.0209* 1.837 0.0385** 2.400 0.0080 .679 0.0234 1.024 0.0304* 1.753 0.0744* 1.988 -0.0335 -1.011 10.01-15 Years 20072008 -0.0019 -.199 0.0131 1.150 0.0094 .961 0.0009 .071 -0.0105 -.264 -0.0008 -.011 0.0108 1.221 -0.0033 -.308 0.0137 1.311 -0.0021 -.215 0.0072 .586 0.0159 1.068 -0.0110 -1.363 0.0213 1.566 0.0006 .037 0.0085 1.141 0.0128 .300 -0.0264** -2.359 -0.0533 -.934 -0.0081 -.118 0.0038 1.423 0.0004 .050 -0.0112 -1.238 0.0197 1.056 0.4234*** 4.997 0.4251*** 4.477 -0.0046 -.808 -0.0028 -.420 -0.0142 -1.213 0.0058 .622 -0.0184 -1.385 0.0079 .552 -0.0196 -1.276 0.0281* 1.910 0.0000 .002 0.0454** 2.394 0.0744 2.968 0.3834 4.286 0.3342 3.892 0.5062 5.014 20092011 0.0208 1.991 0.0051 1.772 0.0444 1.229 0.0926 1.471 0.1229 1.670 0.2104 1.821 0.0323 1.723 0.0329 1.177 0.0152 1.159 0.0360 1.159 0.0522 1.230 0.0572 1.415 0.0798 1.302 0.0572 1.473 0.0909 1.494 0.0572 1.686 0.1334 1.576 0.1219* 2.496 0.2501 2.082 0.1340 1.304 Note: t-statistics are in parentheses, *Significant at 10%, **Significant at 5%, ***Significant at 1% Source: Author‟s calculation Table 4: Cumulative Average Abnormal Return (CAAR) of Sukuk Issuances in Malaysia by Tenures Indicators Average Overall Average Significant Average Symmetric Average Asymmetric Minimum Maximum No of Significant (+ve) No of Significant (-ve) Malaysian Sukuk Issuance by Tenure (2004-2011) Cumulative Average Abnormal Return (CAAR) 5.01-10.00 Years 1.00-5.00 Years 10.01-15.00 Years 2004-2006 2007-2008 2009-2011 2004-2006 2007-2008 2009-2011 2004-2006 2007-2008 2009-2011 -0.0046 0.0204 -0.0063 -0.0039 -0.0819 0.0286 4 0 -0.0326 -0.0196 -0.0279 -0.0346 -0.0755 -0.0121 0 1 -0.0295 -0.0397 -0.0297 -0.0294 -0.1014 -0.0053 0 13 -0.0078 -0.0185 0.0018 -0.0120 -0.0518 0.0254 0 6 0.0167 0.0227 0.0226 0.0142 -0.0346 0.1596 5 9 0.0133 0.0387 0.0069 0.0161 -0.0335 0.0744 5 0 -0.0002 -0.0264 0.0017 -0.0010 -0.0533 0.0213 0 1 0.1094 0.2305 0.1435 0.0947 -0.0196 0.5062 4 0 0.0823 0.1219 0.0827 0.0822 0.0051 0.2501 1 0 Note: The average values are calculated based on the significant findings from Table 3. n = 50 companies. Source: Author‟s calculation Table 5: Summary of Sukuk Issuances by Tenures Years Before Crisis During Crisis After Crisis Summary of Sukuk Issuances by Tenure (2004-2011) No. of Issuances by Tenure Total of Total of 5.01-10.00 years 1.00-5.00 years 5.01-10.00 years 1.00-5.00 years 2004 2005 2006 2007 2008 2009 2010 2011 9 6 17 11 12 25 19 19 Total Total no. of Issuances 32 23 63 118 7 10 22 35 20 8 2 14 39 55 24 118 Total of 10.01-15.00 years 10.01-15.00 years 1 1 8 3 15 1 0 4 10 18 5 33 269 Source:Author‟s calculation DOI: 10.9790/5933-0703028389 www.iosrjournals.org 88 | Page
7. Investigating Stock Market Reactions on Sukuk Issuance in Malaysia Based on Tenures Tables 4 and Table 5 display the market reactions by different tenures . The results show an equal number of issuances between the tenures of 1 – 5 years and 5.01 - 10 years which are 118 issuances each. Although both tenures showed the same number of sukuk issuances, the number of sukuk issuances for the 1- 5 year period, fell during the crisis and increased after the crisis. In contrast, for the moderate tenure of 5.01 - 10 years, the number of issuances increased during the crisis and decreased after the crisis. Sukuk investors avoided risks after the crisis as their confidence was affected by the global crisis. The results showed that the moderate tenure was not affected too much during the crisis. In conclusion, this study suggests the tenure of 5.01 – 10 years is the best tenure for sukuk issuances. VI. Conclusion The paper investigates how the stock market reacts to sukuk issuances based on different tenures before, during and after the recent 2008 financial crisis in Malaysia. The findings indicate that there are positive, significant and asymmetric market reactions in the case of „1-5 years, 5.01-10 years and 10.01-15 years‟ tenures sukuk announcement in certain events. Thus, the findings suggest that the tenure of 5.01 – 10 years is the best tenure for sukuk issuances. The positive market reactions can be interpreted in two ways. First, the market can readily distinguish the news. Second, there are confidence effects that shareholders wealth will be increased through the issuance of these sukuk tenures. This is because, sukuk being neither debt, nor shares are true to the calling of Islamic economics whereby the issue reflects the economic strength of the company and hence the real economic activities underlying the issuance. 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