The Covid-19, Policy, and Islamic Capital Market in Indonesia

This paper examines the impact of Covid-19 (death and positive cases) on Indonesia’s Islamic capital market, proxied by the Jakarta Islamic Index. Covid-19 data in Indonesia, which is proxied by four measures such as the number of new cases (NC), cumulative cases (CC), new deaths (ND), and cumulative deaths (CD). Further, whether any policy from regulators could mitigate its impact, we utilize daily time-series data from January to July and propose the multiple regression model to test its effect with some robustness checks. Our results indicate that Covid-19 leads to a lower price of the Islamic index, and the regulations from the government could reduce its negative impact. The negative impact of Covid-19 could be reduced by policies from the Indonesian government and other authorities like OJK, IDX, and BI. The policy from those regulators is grouped by policy backgrounds such as lockdowns and restrictions, reopening economy like new normal, fiscal, monetary, and macroeconomic, exchange rate, and balance of payments. Therefore, it is pivotal to alleviate Covid-19’s drawbacks on the Islamic capital market by providing relevant policies in Indonesia.


INTRODUCTION
This study examines whether the Corona virus  impacts the Islamic stock market in Indonesia. That purpose is based on the fact that Covid-19 seriously impacts many aspects dramatically, including financial markets  Sources: World Health Organization (WHO) This figure depicts Covid-19 data in Indonesia, including the number of new cases, cumulative cases, new deaths, and cumulative deaths since the first case occurred on March 2, 2020.

Covid-19 in Indonesia
This study offers some distinguish settings compared to previous studies.
First, this study offers a deep understanding of the Indonesian context, especially Islamic finance, as a unique market since there is no sign of declining  compared to other countries with decline or recovery conditions. The prior studies commonly focused on broader context (cross-country analysis) about the impact of Covid-19 on the capital market by comparing composite, Islamic, and each sector indexes (Ali, Alam, and Rizvi 2020;Haroon and Rizvi 2020). Second, this study analyzes any policy interventions empirically to measure the negative impact of Covid-19 on the capital market. In contrast, other studies implicitly discussed the necessity of those policies (Sharif et al., 2020). Third, this study prefers to explore Covid-19's impact on the stock price index rather than price volatility or return (He et al., 2020;Haroon and Rizvi, 2020).
We used regression analysis, ordinary least squares (OLS), to test the relationship between Covid-19, measured by new cases, cumulative cases, new deaths, and cumulative deaths, on the Islamic stock market in Indonesia (Jakarta The Covid-19, Policy, and Islamic Capital Market in Indonesia EQUILIBRIUM, Volume 10, Number 1, 2022 Islamic Index). Further, this study would include any policy to reduce its impact by dummy values from OJK, BI, President, IDX, policy background, reopening economy, fiscal, monetary, and macroeconomic policy, and exchange rate and balance of payments. Daily time-series data show observations from January 1, 2020, to July 7, 2020.

LITERATUR REVIEW Corona Virus Disease (COVID-19)
At the beginning of 2020, the world was shocked by the occurrence of a severe infection whose cause was unknown. Starting with a Chinese report to the World Health Organization (WHO), there were 44 patients with severe pneumonia in Wuhan City at the end of 2019. Initial suspicions were that this was related to a wet market selling fish, marine animals, and other animals. On January 10, 2020, it was discovered that the cause of the incident was a new coronavirus named the novel Coronavirus . Not long after, it was reported that many cases occurred not only in China but even extended to other countries in the world, mainly since the transmission of the virus could occur through human-to-human interactions. At the end of January 2020, WHO declared a Global Emergency status for this coronavirus case and named it COVID-19 (Handayani et al., 2020).
The outbreak of COVID-19 has undoubtedly had a tremendous impact, both from the physical, psychological and environmental aspects (Aeni, 2021). The direct impact of COVID-19 occurs on health aspects, such as the high number of positive cases and deaths due to COVID-19. The high number of COVID-19 cases has made the resources owned by the government more concentrated on handling COVID-19, thus hampering health services other than COVID-19. In addition, the decline in health services is also influenced by public skepticism about access to health services.
Apart from the health aspect, COVID-19 impacts almost all aspects of life.
What is most noticeable is the impact from the economic aspect. Areas affected by COVID will experience a decline in economic levels. The decline's size will differ in each region, depending on the population and the regulations applied to the region. The economic slowdown occurred due to changes in the distribution and demand for goods and services due to the policy of restricting community activities that were implemented. As a result of the economic slowdown, it will increase the number of unemployment and poverty. COVID 19 has caused many workers to lose their jobs, and the new workforce has difficulty finding work due to the lack of available job opportunities. Thus, there is a decrease in income which leads to an increase in the poverty rate.

Sharia Capital Market
The Islamic capital market is all activities in the capital market that comply with Islamic principles. The main factors forming the Islamic capital market are the capital market and Islamic principles in the capital market. Activities in the capital market include market participants, market infrastructure, transaction mechanisms, and transacted securities. Thus, a capital market is said to meet Islamic principles if market participants, market mechanisms, market infrastructure, and the securities being traded have met Islamic principles.
The development of the Indonesian Islamic capital market was triggered by market demand which was then made supporting regulations by the government. At the beginning of its development, the time gap between making regulations and issuing sharia investment products on the market was quite We find that Covid-19 has a negative effect on the price of the Islamic stock index. So, the higher number of Covid-19 leads to a lower stock price index of the capital market in Indonesia. The results are consistent when we use some robustness tests. We also find that the number of deaths due to Covid-19 has a more considerable impact than the number of cases. Further, the regulations from the government could reduce its negative impact. Hence, it is pivotal to alleviate Covid-19's drawbacks on the Islamic capital market by providing relevant policies in Indonesia.
This paper has some contributions as follows. To the literature, this study would be beneficial to enhance the Islamic capital market literature by providing many proxies for Covid-19 like new cases, cumulative cases, new deaths, and cumulative deaths. For the policy makers, this study sheds light on whether or not policies effectively diminish Covid-19's impact.

Corona Virus Disease (COVID-19)
At the beginning of 2020, the world was shocked by the occurrence of a severe infection whose cause was unknown. Starting with a Chinese report to the World Health Organization (WHO), there were 44 patients with severe pneumonia in Wuhan City at the end of 2019. Initial suspicions were that this was related to a wet market selling fish, marine animals, and other animals.
On January 10, 2020, it was discovered that the cause of the incident was a new coronavirus named the novel Coronavirus (nCoV-19). Not long after, it was reported that many cases occurred not only in China but even extended to other countries in the world, especially since it was proven that the transmission of the virus could occur through human-to-human interactions. At the end of January 2020, WHO declared a Global Emergency status for this coronavirus case and named it COVID-19 (Handayani et al., 2020).
The outbreak of COVID-19 has had a tremendous impact, both from the physical, psychological and environmental aspects (Aeni, 2021). The direct impact of COVID-19 occurs on health aspects, such as the high number of positive cases and deaths due to COVID-19. The high number of COVID-19 cases has made the resources owned by the government more concentrated on handling COVID-19, thus hampering health services other than COVID-19. In addition, the decline in health services is also influenced by public skepticism about access to health services.
Apart from the health aspect, COVID-19 impacts almost all aspects of life.
What is most noticeable is the impact from the economic aspect. Areas affected by COVID will experience a decline in economic levels. The decline's size will differ in each region, depending on the population and the regulations applied to the region. The economic slowdown occurred due to changes in the distribution and demand for goods and services due to the policy of restricting community activities that were implemented. As a result of the economic slowdown, it will increase the number of unemployment and poverty. COVID 19 has caused many workers to lose their jobs, and the new workforce has difficulty finding work due to the lack of available job opportunities. Thus, there is a decrease in income which leads to an increase in the poverty rate.

Sharia Capital Market
The Islamic capital market is all activities in the capital market that comply with Islamic principles. The main factors forming the Islamic capital market are the capital market and Islamic principles in the capital market. Activities in the capital market include market participants, market infrastructure, transaction mechanisms, and transacted securities. Thus, a capital market is said to meet Islamic principles if market participants, market mechanisms, market infrastructure, and the securities being traded have met Islamic principles.
The development of the Indonesian Islamic capital market was triggered by market demand which was then made supporting regulations by the government.
At the beginning of its development, the time gap between making regulations and issuing sharia investment products on the market was quite long. The first We find that Covid-19 has a negative effect on the price of the Islamic stock index. So, the higher number of Covid-19 leads to a lower stock price index of the capital market in Indonesia. The results are consistent when we use some robustness tests. We also find that the number of deaths due to Covid-19 has a more considerable impact than the number of cases. Further, the regulations from the government could reduce its negative impact. Hence, it is pivotal to alleviate Covid-19's drawbacks on the Islamic capital market by providing relevant policies in Indonesia.
This paper has some contributions as follows. To the literature, this study would be beneficial to enhance the Islamic capital market literature by providing many proxies for Covid-19 like new cases, cumulative cases, new deaths, and cumulative deaths. For the policy makers, this study shed light on whether or not policies effectively diminish Covid-19's impact.

RESEARCH METHOD
This paper relies on Covid-19 data in Indonesia, which is proxied by four measures such as the number of new cases (NC), cumulative cases (CC), new deaths (ND), and cumulative deaths (CD) absolutely per day starting from March 2, 2020, to July 7, 2020. Those data from World Health Organization  to United States Dollar (USD). is the standard errors or residuals.
To capture the impact of Covid-19 on that Islamic stock index price as the additional analysis for robustness. We run Equation (1) with the Islamic stock index price. Further, in this study, we provide a price of the stock index rather than the return or volatility of the stock index, which primarily prior studies focus on (He et al., 2020;Haroon and Rizvi, 2020). This study also offers a deep understanding by focusing on one capital market (Indonesia) to explore a deeper market rather than a broader context or cross-country analysis like previous research (Ali, Alam, and Rizvi 2020).
In addition, our second hypothesis is whether any policy from the

RESULT AND DISCUSSION
Before commencing the regression analysis, we conduct a preliminary data test. In Table 2, we provide the descriptive statistics of the variables from January 1, 2020, to July 7, 2020. The results depict that the mean values of new cases, cumulative cases, new death, and cumulative deaths are 339, 12,047, 16, and 713 people. The average stock price index for Jakarta Islamic Index is IDR559.50.
Further, the exchange rate is IDR14,560.10 on average. Overall, we present the details as follows: deviation value for policy is 0.37, the maximum value 1.00, the minimum value 0.00, and 0.16 for the mean value. The standard deviation value for Reopening is 0.35, the maximum value 1.00, the minimum value 0.00, and 0.14 for the mean value. Fiscal's standard deviation value is 0.50, the maximum value 1.00, the minimum value 0.00, and 0.50 for the mean value. The standard deviation value Monetary is 0.46, the maximum value 1.00, the minimum value 0.00, and 0.32 for the mean value. The standard deviation value Exbop is 0.46, the maximum value 1.00, the minimum value 0.00, and 0.66 for the mean value.
We also examine the coefficient correlation among variables using a pairwise correlation test to ensure that one variable did not correlate highly with other variables. If the correlation between two variables is high, we need to examine them in different model estimations separately to avoid multicollinearity. Table   3 depicts that new cases have a high correlation coefficient with cumulative cases (0.96), new deaths (0.87), and cumulative deaths (0.97). Those variables are highly correlated since they are the same proxies to measure Covid-19. We need to separate them into different model estimations. Therefore, our models would provide estimations results with no multicollinearity. The details are as follows: (1) NEW CASES 1.00 (2) CUMULATIVE CASES 0.96 1.00 (   (Sharif, Aloui, and Yarovaya 2020). The policies such as President, IDX, and policy background result from a negative coefficient on the stock price index.
Negative relationships are seen in the falling economy, one of which is reflected in the capital market in free fall.
The President of Indonesia, "Joko Widodo," issued a regulation "PERPPU" to maintain financial system stability so that government, banking, and financial authorities can ensure public health. The government also implements fiscal policies to support the national economy to restore social activities such as social assistance, care and health for low-income people, capital injections, tax, interest subsidies, and loans-the guarantees and restructuring fund. To reopen the economy, the governance announced a "New Normal" to encourage Indonesia People to carry out activities as before but with new habits of clean and healthy living behavior. In this phase, the opening of the mall, parks, and recreation areas with healthy protocols have been socialized to revive Indonesia's economic activities. The details of Table 4 are as follows: This paper has some limitations, such as using ordinary least squares with no comparison to other models such generalized method of moments (GMM) to address the endogeneity issue. In addition, the number of healthy people from Covid-19 is not included in this paper. Further, Indonesia's Islamic stock price index could be developed by comparing the return and price volatility.