The Impact of Palm Oil Price on the Malaysian Stock Market Performance

Abstract

The performance of a stock market has always become the center of attention for market analysts and investors. Due to its significant role in the economy of a country, the performance of the stock market is always associated with the economic condition of a country. Because of that, this study intends to examine the impact of commodity prices in influencing the behavior of the stock market index specifically by focusing on the palm oil prices. Since Malaysia is one of the major producers of palm oil, the behavior of the palm oil price is expected to have an influence on the Malaysian stock market index. In pursuing the objective, we have adopted the bounds test approach to analyze the existence of cointegration relationship among the underlying variables of the Malaysian stock market index, interest rate, exchange rate and the price of palm oil. Using monthly data for the period of 1997M12 to 2012M9, results of an ARDL test indicates that all the variables employed are significant in influencing the Malaysian stock market index in the long run as well as in the short run.

Does the Performance of Global Commodities Exhibit Co-movement and Long-run Relationship with the Palm Oil Companies?

“…Meanwhile [3] employed wavelet correlation in order to investigate the causality between crude palm oil, exchange rate, and KLCI. Their empirical results are in line with [2] except that no causal effects were found between crude palm oil and exchange rate. Additional studies by [4] and [5] expanded their data by incorporating the Islamic stock index namely the FTSE Bursa Malaysia Emas Shariah (BMES).…”

“…Numerous papers have delved into the repercussions of global commodity price fluctuations on the palm oil industry, yet there remains a dearth of investigations focusing on how these fluctuations affect palm oil companies. A study conducted by [2] emphasised on the impact of palm oil prices on the Kuala Lumpur Composite Index (KLCI) and their findings revealed a cointegration and a positive relationship between these variables. Meanwhile [3] employed wavelet correlation in order to investigate the causality between crude palm oil, exchange rate, and KLCI.…”

Foreign Investment and Stock Market Development in Indonesia

“…Its plays an important role in the development of any economy's financial system, and it acts as a platform for funding projects and investments capable of creating jobs, reducing poverty, and driving economic growth (Musa & Ibrahim, 2014). Empirical studies confirmed the positive impact of stock market developments on economic growth a country (Nieuwerburgh et al, 2006;Uddin et al, 2013;Masoud, 2013;Nyanaro & Elly, 2017;Nordin & Nordin, 2016).…”

Hubungan Harga CPO, Nilai Kurs, dan IHSG selama Era Labelisasi Palm Oil Free

“…Hasil penelitiannya adalah dalam jangka panjang adanya hubungan yang negatif di antara IHSG dengan harga minyak sawit. Justru sebaliknya hasil penelitian lain yang dilakukan oleh Nordin, Sabariah;Nordin, Norhafiza;Ismail (2014) di Malaysia menemukan bahwa adanya hubungan positif di antara Kuala Lumpur Composite Index (KLCI) dengan harga CPO dalam jangka pendek ataupun jangka panjang. Dengan demikian, adanya hubungan di antara harga minyak sawit dengan indeks pasar modal.…”