The Effect of Oil Price, Gold Price and the Us Interest Rates on the 4 Gcc Market Indices

Introduction

The Gulf States are experiencing unprecedented growth in their economies and stock markets. The number of companies listed and traded on the stock exchange has also gone up in the four GCC countries. Strong corporate results, coupled with increased business and consumer confidence in the region are sending the markets and indices to their all-time high. The hope is that this growth is based on real economic growth, sound market fundamentals, and realistic economic policies. Because of the continuous and successful growth in four of these GCC market indices, they are worthy of further study and examination to study how and what factors are leading to this huge growth.

Objective

The objective of my study is to examine whether there is any long-run relationship(s) exists among the four GCC stock indices (Kuwait, Saudi, UAE, and Oman). Moreover, to study whether these markets are affected by the same three factors which are oil prices, gold prices, and US interest rates for the period 2005. Before starting with the statistical analysis of these four indices a short summary of each stock market index should be provided.

GCC Stock Market Indices

The Kuwait stock exchange index (KSE) has 168 listed companies. There are eight companies in the banking sector, twenty in the investment sector, four in the insurance sector, thirteen in the real estate sector, sixteen in the industrial sector, fifteen in the service sector, four in the food industry, and ten non-Kuwaiti companies.

The Saudi stock market Tadawul index includes the shares of all of the listed companies in the Saudi market. The period from 1996 to 2005, the number of transactions, volume and value traded increased dramatically. Market capitalization has increased by 1,490% and the all share index has increased by 1,122.04%.

Oman's general market index (MSM) has 33 listed companies, of which thirteen companies represent the Banks & Investment Companies Index sector, eleven represent the Industry Index sector, and nine represent the Services Index sector. The service sector contains two oil-related companies (Shell Oman Marketing & BP Oman), one airline company (Oman Aviation Services), and two port services (Salalah Port Services & Port Services Corporation).

The UAE market is represented by Abu Dhabi securities markets index. The index, which is market capitalization weighted, has 38 listed companies in both the Abu Dhabi and Dubai stock markets, representing about 75% of the overall active market. The UAE stock market has 52 registered and active companies with a market capitalization of more than $22 billion. The sectoral distribution of this market indicates that there are eighteen financial institutions in the banking sector, twelve insurance companies and twenty-two service companies.

Oil