Umi Asyiqin Md Amir et al., The Volatility of Ftse Bursa Malaysia KLCI During the Covid-19 Pandemic (2022)
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Article by Umi Asyiqin Md Amir, Nurul Iman Masdi, Nurasyiqin Md Saad, Noreha Mohamed Yusof and Sharina Salmi Azmi of Universiti Teknologi MARA Cawangan Negeri Sembilan, The Volatility of FTSE Bursa Malaysia KLCI During the Covid-19 Pandemic, published in the International Journal of Academic Research in Business and Social Sciences, 12(4), 349–356, online on 05 April 2022. Noting that the World Health Organization declared COVID-19 a global pandemic on March 11, 2020 and that the FBM KLCI had declined since January 2020, the authors use a paired sample t-test on 120 days before and after the emergence of COVID-19, with index data from Yahoo Finance and pandemic data from Worldometers and Kaggle. They find a significant negative impact on the index and recommend future research into the pandemic-related factors behind it.
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The Volatility of FTSE Bursa Malaysia KLCI During the
Covid-19 Pandemic
Umi Asyiqin Md Amir, Nurul Iman Masdi, Nurasyiqin Md Saad, Noreha
Mohamed Yusof & Sharina Salmi Azmi
To Link this Article: http://dx.doi.org/10.6007/IJARBSS/v12-i4/12922 DOI:10.6007/IJARBSS/v12-i4/12922
Received: 07 February 2022, Revised: 13 March 2022, Accepted: 29 March 2022
Published Online: 05 April 2022
In-Text Citation: (Amir et al., 2022)
To Cite this Article: Amir, U. A. M., Masdi, N. I., Saad, N. M., Yusof, N. M., & Azmi, S. S. (2022). The Volatility of
FTSE Bursa Malaysia KLCI During the Covid-19 Pandemic. International Journal of Academic Research in
Business and Social Sciences, 12(4), 349–356.
Copyright: © 2022 The Author(s)
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The Volatility of FTSE Bursa Malaysia KLCI
During the Covid-19 Pandemic
Umi Asyiqin Md Amir1, Nurul Iman Masdi1, Nurasyiqin Md
Saad1, Noreha Mohamed Yusof1 & Sharina Salmi Azmi2
1Center of Statistical and Decision Science Studies, Faculty of Computer and Mathematical
Sciences, Universiti Teknologi MARA Cawangan Negeri Sembilan, Persiaran Seremban
Tiga/1, Seremban 3, 70300 Seremban, Negeri Sembilan, Malaysia, 2Academy of Language
Studies, Universiti Teknologi MARA Cawangan Negeri Sembilan, Persiaran Seremban Tiga/1,
Seremban 3, 70300 Seremban, Negeri Sembilan, Malaysia.
Email: noreh144@uitm.edu.my
Abstract
The COVID-19 pandemic has turned into a social threat to both corporation financial growth
and Malaysia’s economic growth. The World Health Organization (WHO) declared COVID-19
as a global pandemic on March 11, 2020 that affecting many countries. COVID-19 had a
significant effect on the majority of corporation and small businesses, as temporary closures
of businesses implemented during the lockdown period. FTSE Bursa Malaysia KLCI (FBM KLCI)
has been declining since January 2020 due to this pandemic. The goal of this study is to
identify if there is a significant negative impact towards the FBM KLCI after the emergence of
COVID-19 by using the paired sample t-test. There were total of 120 days before and after the
emergence of COVID-19 used as data for the goal of this study. The data for the FBM KLCI
were obtained from Finance.Yahoo.com (Yahoo! Finance website) and data that related to
COVID-19 were collected from Worldometers.com and Kaggle.com. From this study, the
findings suggested that there is a significant negative impact on the FBM KLCI after the
emergence of COVID-19. It is recommended for future research to examine the factors
related to COVID-19 pandemics towards the FBM KLCI.
Keywords: FBM KLCI, FTSE Bursa Malaysia, Stock Market, COVID-19, Volatility of Stock
Market, Paired t-test, Emergence of COVID-19
Introduction
FTSE Bursa Malaysia KLCI, or FBM KLCI is a capitalization-weighted stock market index in
Malaysia. For further understanding of the meaning of FBM KLCI, ’F’ stands for Financial Times
Stock Exchange, ’BM’ stands for Bursa Malaysia and ’KLCI’ stands for Kuala Lumpur Composite
Index. The Malaysia Stock Market Index (FBM KLCI) began trading on January 1, 1977, with a
base value of 100 and a commencement date of April 4, 1986. The FBM KLCI uses the prices
of the 30 largest companies, and the return is determined by index variation over time (Chia
et al., 2020). The 30 companies comprise of, amongst others, CIMB Group Holdings Berhad,
Malayan Banking Berhad and Maxis Berhad.
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According to Rosbi and Haji-Othman (2020) claimed that the COVID-19 outbreak had a major
and negative impact on the FBM KLCI market price. During the outbreak of COVID-19, the
FBM KLCI market faced a negative influence that hindered all economic activities.
Furthermore, based on Baker et al (2020) findings encompassing the years 1918–1919, 1957–
1958, and 1968 the stock market’s unexpected reaction to COVID-19 isn’t only due to the
virus’ mortality. COVID-19 has caused an excess death rate that is only 1/14th that of the
Spanish Flu, as of June 23, 2020.
Moreover, according to Lee, Jais, and Chan (2020), in general, the FBM KLCI has been declining
since January 2020, reaching a low of 1,219.71 on March 19, 2020, the second day of the
Movement Control Order (MCO), which is an initiative of the government of Malaysia to
overcome the COVID-19 pandemic. This situation can be shown in Figure 1.
Figure 1: FTSE Bursa Malaysia KLCI from January 2020 until July 2021
The outcomes of this study could help the Malaysian government to improve the way they
overcome the pandemic, especially if it is proven that there is negative difference towards
the FBM KLCI before and after the emergence of COVID-19. Hence, the FBM KLCI can be
restored and gradually improved right after the COVID-19 pandemic. If the stock market
returns are revived in the future, the businesses are able to operate as usual again with the
decreasing of COVID-19 outbreaks, thus the economy of Malaysia will recover soon.
Regarding this, Malaysians will be more satisfied since their financial status will also improve
and recover as before. Furthermore, this study benefits the investors and also traders. It is
because they could differentiate the trend of FBM KLCI before and after the emergence of
COVID-19, whether it keeps declining or increasing. Considering investors or traders were
already aware of how the COVID-19 pandemic affects the stock market, they would be extra
cautious while investing. Moreover, this research also benefits the researchers as it could add
extra input and knowledge regarding economic issues during the pandemic of COVID-19.
Literature Review
The COVID-19 epidemic was first discovered in the Chinese city of Wuhan, in the province of
Hubei, in December 2019. The infection then spread to other cities and countries in less than
a month. The World Health Organization (WHO) declared COVID-19 a global pandemic on
March 11, 2020, affecting over 200 countries (Chakraborty & Maity, 2020). The WHO released
the first coronavirus monitoring research on January 21, 2020. Two days later, China imposed
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a curfew in Wuhan, Hubei. South Korea was the second country after China to experience a
major COVID-19 outbreak, with roughly 9.1 million COVID-19 positive cases and 472, 539
deaths worldwide as of now (Vas, Hopkins, Feher, Rubino, & B Whyte, 2020). Since the
disease’s introduction, the number of positive cases and deaths had increased, and though
the disease’s growth had slowed in certain regions of the world, such as Europe, as of
November 2020, it was still growing rapidly in others, such as America and Asia. The global
spread of COVID-19 is shown in Figure 2.
Figure 2: The global spread of COVID-19 from January 2020 until November 2020
In many ways, the COVID-19 crisis had become more foreseeable. What was formerly referred
to as a “Chinese problem”, and later, an “Italian problem” is now referred to as a “global
problem” (Baldwin & Weder, 2020). As a result, governments were forced to adopt more
harsh anti-recession measures. Governments, with few exceptions, initially downplay the
disease before it spreads widely among the populace. Then they employed extreme social
distancing measures like job and school closures to further isolate themselves. Since the
recession, COVID-19 has significantly shaken the global economy and financial markets. All of
this was attributable to the virus’ highly contagious nature and the inevitability of its explosive
spread during the epidemic’s ’acceleration stage.’
As this disease is widespread, highly contagious sickness was detected, prompting investors’
minds to be flooded with negative thoughts and concerns. The COVID-19 epidemic has had
an impact on the stock market in Malaysia. As of March 27, 2020, the KLCI had plummeted
20.52% since the beginning of the year, reaching its lowest levels in a decade. Furthermore,
Ozili and Arun (2020) reported that the COVID-19 pandemic has two effects on the stock
market. Firstly, the pandemic put a halt to commercial and corporate operations, which then
had an effect on the stock system. Secondly, the confusion surrounding the COVID-19 cases
affected investors’ investment decisions, resulting in increased volatility in the stock market.
As a result, many businesses, regardless of its size, faced liquidity issues (Tashanova et al.,
2020) which subsequently led to three organizations; the World Bank, the Asian Development
Bank, and the International Monetary Fund allocating a total of 68.5 billion dollar to assist the
affected countries (Almenfi et al., 2020).
Objective and Hypothesis
The objective of this research was set up, which is to determine whether there is a significant
negative impact towards the FBM KLCI after the emergence of COVID-19. Meanwhile, the
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hypothesis was stated in this research, which is there is a significant negative impact towards
the FBM KLCI after the emergence of COVID-19 for the alternative hypothesis and there is no
significant negative impact towards the FBM KLCI after the emergence of COVID-19 for the
null hypothesis.
Methodology
This research was using a secondary data and the data set used was FBM KLCI before the
emergence of COVID-19 (BCOVID) from August 1, 2019 until January 24, 2020 (120 days)
and FBM KLCI after the emergence of COVID-19 (ACOVID) from January 28, 2020 until July
22, 2020 (120 days). To be more precise, the details of each variable is explained in Table 1.
Table 1: The Description of Variables
Type of Variables Description of Variables
Variables Name
Numeric BCOVID FBM KLCI from August 1, 2019 until January 24, 2020
Numeric ACOVID FBM KLCI from January 28, 2020 until July 22, 2020
Based on the main objective of this study, a dependent t-test or paired t-test was conducted
by using the SPSS software to determine if there is a significant negative impact towards FBM
KLCI after the emergence of the COVID-19 pandemic. To be clearer, there was a graph
constructed to see if there are any trends or patterns especially the components of time series
analysis such as trend, cyclical, seasonal or irregular component between the FBM KLCI and
the total cumulative cases of COVID-19 in Malaysia. Furthermore, the data set that used for
the statistical testing, which is the paired t-test is a paired sample of the FBM KLCI with two
different ranges of period, which are (1) before and (2) after the emergence of COVID 19 in
Malaysia.
To identify whether there is a significant negative impact towards FBM KLCI after the
emergence of COVID-19, a hypothesis testing must be conducted. It can be shown by:
𝐻0 : 𝜇𝑑 = 𝜇𝑎𝑓𝑡𝑒𝑟 − 𝜇𝑏𝑒𝑓𝑜𝑟𝑒 = 0
(There is a no significant negative impact towards FBM KLCI after the emergence of COVID-
19)
𝐻0 : 𝜇𝑑 = 𝜇𝑎𝑓𝑡𝑒𝑟 − 𝜇𝑏𝑒𝑓𝑜𝑟𝑒 < 0
(There is a significant negative impact towards FBM KLCI after the emergence of COVID-19)
Furthermore, the mean difference (𝑑̅ ), the standard deviation of the differences (𝑆𝑑 ), the
standard error of the mean difference (𝑆𝐸(𝑑) ̅̅̅), and the t-statistic (𝑡) need to be calculated
first before proceeding to the results. The formulae can be shown by these equations:
∑𝑑
Mean difference, 𝑑̅ =
𝑛
(1)
2
∑𝑑 − 2 (∑ 𝑑)
Standard deviation of the differences, 𝑆𝑑 = √ 𝑛−1 𝑛
(2)
𝑆𝑑
Standard error of the mean difference, 𝑆𝐸(𝑑̅ ) =
√𝑛
(3)
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𝑑̅−𝜇𝑑
Test statistic, 𝑡 = 𝑆𝑑
√𝑛
(4)
RESULTS AND DISCUSSION
Figure 3: The Volatility of FBM KLCI Before and After the Emergence of COVID-19
In the process of describing or summarizing a set of data, the researcher used trend lines as
statistical technique to make the data more meaningful. A trend line is a straight line that
connects two or more price points and then extends into the future to act as a line of support
or resistance. In this study, a graph of two trend lines was constructed regarding the FBM KLCI
versus the total cases of COVID-19 in Malaysia. It is to be more clearly seen if there is a
negative impact towards the FBM KLCI after the emergence of COVID-19 in Malaysia.
According to Figure 3, the period of the data set is divided into two sections which are before
COVID-19 (BCOVID) and after COVID-19 (ACOVID). The data of BCOVID are from August 1
2019 until January 24 2020 while the data of ACOVID are from January 28 2020 until July 22
2020. The graph shows the volatility of the FBM KLCI and the cumulative cases of COVID-19.
The graph shows an irregular component and trend component for the two data sets which
are the KLCI and COVID-19 cases. However, the graph shows that there is no cyclical and no
seasonal component exist in the data series.
Then, the FBM KLCI is ranges from 1550 to 1600. This shows a sideways movement. However,
starting from January 25 2020 the first COVID-19 cases were detected. At that time, there
were only 4 cases of COVID-19. The COVID-19 cases in Malaysia started to give effect to the
FBM KLCI at early March 2020 and continued to rise until the total cases reached 7,000 in May
2020. Moreover, the KLCI went down drastically to the lowest level in March 2020 which is
1279.36 after the sudden cases of COVID-19 started to appear. However, KLCI steadily
increased from 1,279.36 to 1,450.54 even though the total cases of COVID-19 showed no signs
of decreasing.
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Table 2: Paired Samples Test
Paired Differences
95% Confidence Interval Sig. (2-
Standard Standard t df
Mean in the Difference tailed)
Deviation Mean Error
Lower Upper
129.4290 92.1412 8.4113 112.7738 146.0842 15.388 119 .000
Based on Table 2, the mean difference of the FBM KLCI before and after the emergence of
COVID-19 is 129.420 with a standard deviation of 92.1412. Moreover, the confidence interval
of the mean difference is ranging from 112.7738 and 146.0842. Furthermore, it shows that
the p-value is equal to 0.000 (p-value = 0.000/2) which means that the null hypothesis is
rejected. Hence, it is concluded that there is a significant negative impact towards FBM KLCI
after the emergence of COVID-19.
Conclusion
As conclusion, this research shows that the results of this study tally with the results of
previous studies which say that there is a significant negative impact on the FBM KLCI after
the emergence of COVID-19. This finding is supported by Lee et al (2020) studied which
indicated that since the beginning of January 2020, the FBM KLCI has been on a downward
trend, hitting a low point of 1219.71 on March 19, 2020, the second day of the Movement
Control Order (MCO). Based on Bakar and Rosbi (2020) article, the outbreak of COVID-19 has
created problems among equities market investors. Therefore, the FBM KLCI index indicated
a greater decrease in value from January to March 2020. In January, the FBM KLCI index was
1602.5, and by March 2020, it had dropped to 1348.72. During the three months of the
COVID-19 pandemic, the stock fell by 253.78 points. On the date the report is returned on
January 4, 2022, the FBM KLCI index is 1537.190 (Malaysia, 2022). It shows that the index is
ranging from 1500 to 1600 which is an almost similar value to that of before the pandemic.
Therefore, this study concludes that the FBM KLCI is slightly recovering from the impact of
COVID-19.
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