WHAT DRIVES RETURN OF SUKUK IN THE LONG AND SHORT TERMS: EVIDENCE FROM INDONESIAN

This study aims to determine the effect of liquidity, inflation, and interest rates on the return of State Retail Sukuk (SUKRI) both in the short term and in the long term. Sampling in this study used a purposive sampling method by considering that the maturity of the series is the most recent and can be obtained in the secondary market and the data sources obtained from the monthly statistical reports of the Indonesia Stock Exchange (idx.go.id), the official website of Bank Indonesia (bi.go.id), as well as through a special request to The Indonesia Capital Market Institute (TICMI). Analysis of the data used in this study is a time series, namely research that is measured over a certain period of time. The period data used was in March 2017 on the grounds that the 009 Retail Sukuk as the object of this study were published in that month and ended in March 2020. The method used in this study is ARDL-ECM after going through the stationarity test and cointegration test. The results show that in the long term only the BI rate variable has a significant positive effect on Sukuk Returns, while in the short term only the Liquidity variable has a significant effect on Sukuk Returns. On the other hand, the inflation variable is known to have no significant effect on the Sukuk Returns in the long and short term. This research can be a reference for investors to make decisions in choosing SUKRI as their investment portfolio, as well as a consideration for the government in regulating risk management policies and determining the results offered to SUKRI which will be issued for subsequent series.


Introduction
Sovereign Sharia Securities (SBSN) or so-called Sukuk are Sharia investments issued by the government as an alternative to finance the state budget deficit. In contrast to conventional bonds which are valued as debt securities, sukuk are valued as certificates of ownership or purchase of assets. Therefore, it requires the existence of an underlying asset as proof of investor ownership of investment activities, while conventional bonds do not require an underlying asset in their issuance.
Indonesia is one of the countries with a large and potentially more liquid sukuk market along with Malaysia, Turkey, and Hong Kong 1 . One type of sovereign sukuk in Indonesia is Retail Sukuk (SUKRI).
SUKRI consists of several series which applied an ijarah contract with a sale and leaseback scheme, issued by the government of the Republic of Indonesia through the issuing company as a sukuk selling agent. SUKRI is a unique type of sukuk since its issuance is specifically intended for individual investors, Indonesian citizens (WNI). Retail Sukuk Series 009 (SR-009) is a sovereign retail sukuk with the latest maturity date, which was issued on March 22 nd 2017 and valid until March 10 th 2020 and applied an ijarah asset to be leased contract with a yield of 6,9 percent per year applicable for 3 years 2 .
The main goals for investors investing in sukuk is to get a return (profit) which in retail sukuk is called yield, moreover, by investing in 1 Nienhaus, Volker;Karatas, A. (2016). Market Perceptions of Liquid Sovereign Sukuk: A New Asset Class? International Journal of Islamic and Middle Eastern Finance and Management,9(1), 87-108. 2 DJPR, "Masa Penawaran Sukuk Negara Ritel Seri SR-009 Resmi Dibuka," last modified 2021, accessed March 14, 2021 SUKRI investors can contribute to the development of the country. High yields are the main consideration for investors to invest in sukuk. As an investment instrument, apart from offering returns, it is undeniable that SUKRI also has risks attached to it. Investors who are interested in investing their funds in sukuk must be well-informed on the benefits and risks of it. Liquidity risk, inflation risk, and market risk are important in determining the yield that investors will receive.
Various studies on yields on investment have been carried out previously, such as the research by 3 which shows that inflation has a significant negative effect on sukuk yields. On the other hand, 4 concludes that inflation has no significant effect on sukuk yields. 5 implies that the BI-rate has a significant positive effect on corporate bond yields, in contrast to 6 research which reveals that the BI-rate has no significant effect on government bond yields. The existence of these contradictory findings is a supporting factor for researchers to conduct further studies. In addition, to the best of the author's knowledge and according to 7 there are limited research which examine yields on sovereign retail sukuk, because the majority of existing studies examine 3 Puspa, M., & Duasa, J. (2017) Therefore, several references used in this study do not only refer to the yield of sukuk, but also the yield of bonds in general.

Liquidity Risk
Liquidity is a broad concept and has various meanings. 13 states that liquidity is the ability of investors to convert securities into cash at the same price as the previous price assuming no new information since the first trade. 14 defines liquidity as a market condition in which there is convenience in large-scale transactions without or with a low impact on market prices.

Inflation Risk
Inflation risk in retail sukuk occurs due to the nature of its fixed income, investors bear the risk that inflation can be higher than the payment of yields, which causes the real value of investment to shrink 17 . Inflation itself is an increase in the prices of goods and services in general and continuously within a certain period 18 . The indicator used to measure inflation is the CPI (Consumer Price Index) with the following formula 19 .

Market Risk
Market risk is the potential loss for investors in the event of an increase in interest rates which causes a decrease in Retail Sukuk prices in the secondary market 20 . Losses (capital loss) can occur if investors sell Retail Sukuk on the secondary market before maturity at a lower selling price than the purchase price. Market risk consists of exchange rate risk and interest rate risk. In this study, the researcher only takes the interest rate risk using the BI rate as a proxy because that SUKRI is only

Liquidity to Sukuk Return
Trading Volume is used as a proxy of Liquidity. If liquidity increases, yields will respond negatively, this is because the risk borne by investors will be low, resulting in low yields. This formulation is in line with the research of 23 which states that sukuk liquidity has a significant negative effect on the sukuk spread.

Inflation on Sukuk Return
If inflation is high, the sukuk yield will rise. Inflation causes money circulating in the community to increase so that the intrinsic (real) value of money will decrease and also result in a decrease in investment value. Investment risk will have an impact on the decrease in purchasing power or real income of investors. Responding to this, investors will expect higher profits so that yields will move up. This is in line with 24 which states that inflation has a significant positive effect on sukuk yields. Therefore, it can be hypothesized that: H2: Inflation has a positive effect on Sukuk Return

Interest Rate to Return Sukuk
If the BI Rate, as a proxy for interest rates, increases, the yield on sukuk will also increase. Because the increase in the BI Rate will reduce the yields received by investors, this is due to the fixed rate SUKRI yields, so investors will demand higher yields. This is in line with 25 which states that the BI rate has a significant positive effect on bond yields. To conclude, it can be taken the hypothesis that: method was selected as a technique in analyzing the data in this study.
In the first stage, the stationarity test or unit root test will be carried out using the Augmented Dickey-Fuller (ADF) test.     Referring to 32 if the F statistic is greater than the critical value I(1) then reject H0, meaning that there is a cointegration or long-term relationship between variables. Table 5 shows the results of the cointegration test with the Bound test, where the F-statistic value is greater than the critical value I(1) for 5% (4.581556 > 3.67), meaning that in the long run there is a cointegration relationship. Therefore, the analysis will be continued by testing the long-term relationship using the Error Correction Model (ECM) method.  Table 6 provides an overview of the influence between variables in the long and short term partially. It can be seen that in the long term, YIELD is only significantly positively affected by BIRATE at lag 1 with a probability value of 0.0301 which is smaller than the critical value of 5% (0.0301 < 0.05), while in the short term it is significantly negatively affected by LIQ with probability 0.0332 < 0.05.
On the other hand, the INF variable has no significant effect on YIELD both in the long and short term. After going through a diagnostic test consisting of a serial correlation test, a CUSUM test, and a CUSUM Q test. Therefore, it can be concluded that the model in this study can be declared stable and free from structural breaks.

Liquidity to Sukuk Return
Liquidity (LIQ) in this research is measured by trading volume SR-009 in the secondary market. In the long term, it can be seen in table   6 that the probability of LNLIQ at lag-1 is greater than the critical value of 0.05 (0.4091 > 0.05), it can be interpreted that LNLIQ has no significant effect on YIELD in the long term. The reason behind this finding can be explained that the investment characteristics of retail sukuk are aimed at investing in the medium term with an average tenor of retail sukuk for 36 months or 3 years. Where investor profits will be obtained regularly every month from the fixed coupon given. Thus, liquidity in the long term will not affect the return of sukuk obtained by investors.  Amihud, Yakov;Mendelson, H. (1991). Liquidity, Maturity, and the Yields on U.S. Treasury Securities. The Journal of Finance, 46(4), 1411-1425 35 Rusgianto, S., & Ahmad, N. (2013) who stated in their research that the higher the trading volume of an investment instrument (including sukuk), the higher the yield that investors will get. Finally, hypothesis 1 (H1) which states that liquidity has a negative effect on sukuk returns is accepted.

Inflation on Sukuk Return
Inflation (

Interest Rate to Return Sukuk
Referring to the test results in the long term and short term, it appears that BIRATE has a significant positive effect on YIELD in the long term, but has no effect in the short term. In the long term, a 1% increase in BIRATE will be responded to by YIELD with an increase of 61.98%. The increase in interest rates will be responded to by the eroding value of investment because the yield of Retail Sukuk is fixed, so investors will require high yields, then the returns obtained will The results of this study are in line with the findings of 47 , 48 , 49 , and 50 which said that the Interest Rate (BI Rate) has a significant positive effect on bond yields. In different investment instruments, namely stocks, it was also found that interest rates have a positive influence on returns on stock portfolios 51 . Although many previous studies have used bonds as the object of study, the presence of several characteristics in common between bonds and sukuk makes the references used valid. So, it can be concluded that accepting hypothesis 3 (H3) means that interest rates have a positive effect on Sukuk Yield.

Conclusion
One of the goals of investors investing in Islamic bonds is to get a return (profit) which in retail sukuk is called yield (yield).
High yields will attract investors to invest in sukuk. As an investment instrument, the State Retail Sukuk, apart from offering returns in the form of returns, also carries risks such as liquidity risk, market risk, and inflation risk. Based on the results of data analysis and discussion in the study, it was found that in the long term only the Interest Rate variable had a significant positive effect on the Sukuk Return, while in the short term only the Liquidity variable had a significant effect on the Sukuk Return. In contrast, the inflation variable is known to have no significant effect on Sukuk Return in the long term and the short term.