Performance of Islamic and Conventional Funds: Evidence from Saudi Arabia and Malaysia

Catherine S F Ho*, Nur Hazimah Amran, Irfan Syarafuddin B Ab Aziz and Wahida Ahmad

Abstract:Financial crises and the geopolitical issues around the world have caused much volatility in returns and market uncertainty. This trend of higher uncertainty in risk and return causes vast changes in stock and investment values, which caused investors scrabbling to maintain the value of their wealth. It is therefore vital that investors understand and compare investment alternatives in order to maximize return. The purpose of this research is to analyze the performance of Islamic and conventional mutual funds and provide a comparison of fund performances to enable investors to make informed decisions. Mutual fund data from 2013 to 2017 for Saudi Arabia and Malaysia, the two largest Islamic fund markets are compiled and risk-adjusted performance statistics applied to arrive at measurement of performances. Although fund performance comparison is a well-researched area, this study contributes to the literature in terms of a comprehensive investigation of various types of Islamic funds with an indepth evaluation of different investment time horizons. Empirical evidence on risk-adjusted performance comparison indicates that Malaysian conventional equity, mixed asset and money market funds for all 1, 3 and 5-year horizons outperform their Islamic counterparts. Similarly, Saudi Arabian equity and mixed asset funds also outperform their Islamic counterparts for all time horizons. On the contrary, the Saudi Islamic money market funds outperform their conventional partners. Cross country comparison confirms that Malaysian funds achieve superior performance except for money market funds which underperform their Saudi counterparts. In summary, current evidence concludes that, depending on the investment horizon and risk appetite, investors are better off investing in the appropriate fund.

The Impact of Exchange Rate Fluctuations on International Trade between Malaysia and China

Ke-Chyn and Mui-Yin Chin*

Abstract:This study examined the impact of exchange rate fluctuations on the level of international trade between Malaysia and China using 45 observations spanning from 2010 quarter 1 to 2021 quarter 1. The Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model was adopted to compute the exchange rate fluctuations. International trade between Malaysia and China was selected in this study as, since 2009, China has consistently been Malaysia's top trading partner. Besides, to produce precise output, this study employed two models: the export and import models. The empirical results, derived from Autoregressive Distributed Lag (ARDL) modelling, suggested that exchange rate fluctuations had a negative but statistically insignificant impact on exports. In contrast, exchange rate fluctuations had a positive and statistically significant impact on imports. This result implied that importers from Malaysia were generally risk-takers, as they tended to trade significantly during periods of high exchange rate fluctuation. However, to avoid losses for both exporters and importers due to exchange rate fluctuations, policymakers from both countries should ensure that facilities for exchange rate hedging become more convenient and straightforward for traders so that international trade continues to bloom for both countries.

The Impacts of External and Internal Uncertainties on Income Inequality in The ASEAN 5 Countries

Goh Lim Thye*, Selvarajan Sonia Kumari, Yong Sook Lu and Shahabudin Sharifah Muhairah

Abstract:From a theoretical standpoint, increasing uncertainty causes delays in additional investment and hiring. Thus, income gaps between rich and poorer groups are expected to stretch further in times of uncertainty. Given that the causal relationship between uncertainty and income inequality poses an area of concern. This study utilised the Autoregressive Distributed Lag ARDL) estimation technique on data ranging from 1961 to 2020 to examine the possible impact of external uncertainty (world uncertainty) and internal uncertainty (within-country uncertainty) on income inequality in the ASEAN 5 countries. The results demonstrate that, in the long run, the income inequality of the ASEAN 5 countries was more sensitive to external uncertainty shocks world uncertainty) than to internal uncertainty shocks (within-country uncertainty). More specifically, external uncertainty was a significant determinant of income inequality of all ASEAN 5 countries. In contrast, internal uncertainty only mattered for the income inequality levels of Malaysia and Thailand. On the other hand, in the short run, while external uncertainty affected Thailand's income inequality level significantly, internal uncertainty was found to matter for the income inequality level of Malaysia, Singapore and Thailand. Thus, the results reflect that the impact of uncertainties on income inequality on the ASEAN 5 countries was more significant in the long run than in the short run.