Defaulters Profile in Malaysia Sukuk Market

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International Journal of Academic Research in Business and Social Sciences, 2020

The Malaysia enjoys the monetary and non-monetary benefits for being the sukuk hub for globe. Malaysian market has already suffered much from defaults. To save them from future defaults the periodic update must be taken for the closeness of defaults. This study calculated distance to default (DD) for 231 observations for the time period of 2011-2017 in the post-crisis era. It was noted that the sukuk issuers are although diverse in their credit profiles, on the aggregate most of them are having strong level of assets to absorb their liability pay-offs. The DD values were at highest level for logistics, industrial goods, manufacturing, real estate and construction and lowest in energy sector. Directions for future research were also discussed in concluding part of this paper.

2012

This paper discusses the underlying principles of Sukuk. The ultimate objective of the study is to provide an understanding on the fundamental idea of Sukuk, its rating and its implication to default risk. Sources of data include observation, documents and texts, specifically from Securities Commission Malaysia (SC), Rating Agency Malaysia (RAM) and Malaysian Rating Corporation Berhad (MARC), Standard & Poor subject matter. Despite showing consistent growth of issuance across countries, Sukuk may also promote default risk as Sukuk also needs to undergo a credit rating assessment of its future payment prospects. Even though Sukuk issuance comes together with asset security, however any negative migration of the credit rating assessment would indicate default risk.

The issue of sukuk default had gained particular attention in the recent years especially after the global financial crisis that hit the world economy. This study analyzes and profiling the sukuk defaulters in Malaysia. This study includes issuers of sukuk from 2000 to 2010. Information of the selected issuers of sukuk is extracted from their annual report in the CCM database. The study found that the highest number of sukuk default occurred in 2009. Mixed result was found on initial rating as default occurred for short-term and long-term instrument.

UNIMAS Review of Accounting and Finance, 2021

Financial stability and Sukuk expanded swiftly into the financial industry after the 2007-2008 global financial turmoil. Malaysia's Sukuk market is arguably the most prominent in Islamic finance globally, and its inherent nature gives it a better security on the premise of guaranteed firms' financial stability and returns to investors. This study aims to explore the extent of the Malaysian firms' financial stability are being influenced by the characteristics of Sukuk and also the firms' characteristics. Sixty-one listed companies that have issued Sukuk from 1997 to 2017 have been selected for this study. The naive distance to default (DD) developed by Bharath and Shumway was used as a measure of the firms' financial stability. Ordinary Least Squares (OLS) was employed in this study, and the results confirmed that Sukuk could promote the firms' financial stability. The variables related to the characteristics of Sukuk that were found to influence financial stability were the intensity of Sukuk and the proportion of Sukuk financing. The firm size, valuation, solvency, and profitability were the firms' characteristics that have also affected the firms' financial stability significantly. All these provide evidences that Malaysia should play more active role in promoting the development of Sukuk market, and at the same time should be aware that financial stability is a systematic element which involved many complex factors.

International Journal of Fiqh and Usul al-Fiqh Studies, 2019

The nascent Islamic finance industry is still facing the challenges of uncertainties in legal regimes, Sharī'ah interpretations, the right of investors, and remedies in default circumstances. The event of Sukūk default is one of the significant challenges faced by the Islamic capital market. The recent Dana Gas Sukūk default triggered by Sharī'ah compliance interpretations has shown the extent of danger that moral hazards could cause to the entire Islamic finance space. Scholars have argued that the Sharī'ah-compliant arguments witnessed in the industry were because of the nature of the capital market framework of any particular jurisdiction and were not significantly Sharī'ah issues. This study aims to carry out a brief comparative analysis of the default cases in Malaysia and the United Arab Emirates (UAE). The study compares the legal jurisdiction and regulatory framework in summary-background of the judges and court decision samples based on these structures and how they have influenced Sukuk default regulations in the jurisdiction. This study employs a comparative analysis by considering fundamental elements in the regulatory framework.

The International Journal of Excellence in Islamic Banking and Finance, 2013

Purpose -The purpose of this paper is to analyse the basic concept of how one Sukuk (an Islamic bond) could be in default based on a theoretical concept, as is a case in Indonesia. The paper addresses three aspects: (a) the contract, (b) the research report, and (c) the rating report. Design/methodology/approach -The author applied the research methodology to analyse the Sukuk's prospectus, the rating agency reports, the research reports, and company stock prices. The methodology includes deep and descriptive analysis. Findings -In reference to the concept of Ijarah (lease) Sukuk, the company should pay the coupon in time as long as the lessee can still afford to pay it. However, the company may not pay the coupon in time may not occur because the image of the Sukuk is similar to that of a bond, which is assumed as a debt subject based on the ability of the company as a whole to pay. As long as the lease is paid by the lessee, there shall be no reason for postponing the payment or default of the Sukuk. But, the fact is, one Ijarah Sukuk postponed the coupon fee due to mismanagement of cash flow or illiquidity of the company. Research limitations/implications -The author took a comprehensive look at the defaulted Sukuk of a cargo company. Because of the specificity of this case, there are limitations to the research because other industry types in similar scenarios may be different. Originality/value -Focusing on this case has many implications to others such as the legal issue. This may be the first paper to present a comprehensive analysis of the Sukuk default in Indonesia.

Hukum Islam, 2023

Sukuk provide opportunities for the public to make long-term investments, issuance of sukuk can benefit in proportion to the profit sharing. Thus, there is a need for risk management and legal protection for sukuk holders. This study aims to find out clearly related to the regulations that cover sukuk holders against PT Berlian Laju Tanker (issuer) which has failed to pay its principal funds or margin/fees. The method in this study is normative juridical which is carried out by examining library materials or secondary materials. This study uses a qualitative data analysis method which is presented descriptively, namely by describing a policy related to the analysis of legal protection for sukuk holders against the risk of issuers failing to pay. Based on the findings of this study, investors holding sukuk can learn more about companies that issue sukuk so that it is possible to better evaluate the value of returns and control the risks associated with their ownership. Availability of information aimed at reducing default by issuers and increasing capital market efficiency. This research concludes that PT Berlian Laju Tanker sukuk holders are given two different types of legal protection, namely preventive legal protection and repressive legal protection.

Sukuk and bonds are two kinds of financial instruments that share the Malaysian capital market. Sukuk are Sharia-compliant financial instruments referred as " Islamic bonds " in the Malaysian market (Note 1). The aim of this paper is to diagnose the performance of Sukuk portfolios compared with bond portfolios. For this purpose, we use the series of indices TR BPAM ALL BOND INDEX. Those indices cover the whole Sukuk and bond Malaysian market. We collect historical data of those indices from the website of Bond Pricing Agency of Malaysia (BPAM) for a period of six years from 2007 to 2012. We first study the significance of the difference in the portfolios' mean return. Secondly, we address the portfolios' return correlation. Comparing indices shows that Sukuk index outperformed the bond index and market index. Furthermore, the results confirm a significant and positive correlation between returns of Sukuk and bond portfolios.

The results revealed that there is a statistically significant relationship among variables and most of the listed issuer was issued sukuk Al-Bai-Bitaman Ajil (BBA) (68%) as compared to others sukuk structure whereby majority the issuer listed firms comes from infrastructure and utilities sector (53%). The listed firms should issue sukuk since it was proven can generate high yield besides highly demanding in global capital market not only by muslim community but also non muslims.