The Need To Study The GCC Stock Market Essay

Stock markets in GCC states have developed significantly over the last 10 old ages. Some factors have played a critical function in this betterment, which include, among others, the accomplishment of a higher economic growing, pecuniary strength, stock market betterment, denationalization, fiscal liberalisation and new institutional model for investors.

Stock markets in the Gulf Cooperation Council ( GCC ) , viz. , Bahrain, Kuwait, Oman, Saudi Arabia, Qatar and United Arab Emirates however have received modest concern in malice of their considerable betterment, fast growing and liberalisation ( Marashdeh and Shrestha, 2010 ) .Small is known on the factors that influence stock monetary values in GCC. Harmonizing to Rahman, Sidek and Tafri ( 2009 ) , many surveies on the determiners of stock monetary values have been undertaken on stock market in developed states ( give a few illustrations ) . Several surveies can be found on emerging states such as Chen ( 2007 ) which investigated the nexus between macro and non-macro explanatory factors and Chinese hotel stock returns.

Chen recommends that more surveies utilizing informations from different states and markets should be undertaken.Surveies in the context of GCC states are desirable for several grounds. First, these states are chief providers of oil in Earth energy markets. A A The GCC economic systems are oil-dependent, and on a day-to-day or a hebdomadal footing their oil monetary values take their cues from the hereafters ‘ monetary values for West Texas Intermediate ( WTI ) , a primary petroleum oil watercourse traded on the New York Mercantile Exchange ( NYMEX ) ( Ravichandran, K, ( 2010 ) ) .

Having several forms in common, GCC states together, on the other manus, history for approximately 20 % of planetary oil production, and command 36 % of planetary oil exports, and have 47 % of proved planetary militias. Net incomes, authorities budget grosss and outgos and aggregative demand are mostly determined by oil exports. The parts of oil to GDP scope from 22 % in Bahrain to 44 % in Saudi Arabia.Furthermore, as shown by Rault and Arouri ( 2010 ) , the stock market liquidness index of the three largest GCC economic systems ( Saudi Arabia, the UAE, and Kuwait ) is positively associated with the oil importance index and, stock monetary values in all GCC market, except for Saudi Arabia, is positively impacted by the oil monetary value additions. In add-on, Ravichandran and Alkhathlan ( 2010 ) recommends for researches to happen the consequence of macro-economic factors over GCC stock markets maintaining oil monetary values as changeless.

Harmonizing to Arouri and Rault ( 2010 ) , research workers and market participants have been seeking to place the consequence of oil monetary values on stock monetary values but do non make any consensus. Their survey however show that oil monetary value alterations significantly affect stock markets in GCC states, hence GCC states, as a larger OPEC policymakers, should give attending to how their actions impact oil monetary values and to the effects of oil monetary value alterations on their ain economic systems and stock markets. They besides advised for farther researches to look into the nexus between oil and stock markets in GCC states by utilizing different economic sectors.

Second, GCC stock markets are different from those of developed and from other emerging states in that they are merely weakly integrated within international markets and are really sensitive to regional political events ( ref// ) . Finally, as suggested by aˆ¦.GCC markets are really promising countries for international portfolio variegation, and some reforms have been made freshly in order to pull planetary investors. Analyzing the determiners of stock market monetary value in GCC stock market may assist GCC and foreign investors to do necessary investing determinations and may be of usage to policy-makers, which regulate stock markets. For these grounds, a survey centered on GCC states should be of great involvement.The demand to concentrate on Insurance sectorRecent development in GCC indicates the growing potency of the insurance sectoraˆ¦.. ( Explain a small spot )The undermentioned statement high spots the importance on insurance sector in GCC.

“ While the planetary insurance market has shrunk somewhat, the market in the GCC ) grew at a rapid gait of six per cent in non-life insurance and nine per cent in life insurance in 2009 and is expected to go on to turn. Insurance incursion in the GCC is two times lower than the Bric states. To make the same market incursion as Bric over the following decennary, the GCC market will hold to turn at an one-year rate of 15 per cent, which is accomplishable, ” ( AT Kearney, a prima direction consulting house, 2010 )Following the suggestion by Arouri and Rault ( 2010 ) for a survey that focus on a peculiar sector in look intoing the determiners of stock market public presentation, the focal point on Insurance sector is justified.Furthermore, the findings from such survey would be good to developing actuarial theoretical accounts for underwriting and investing operations of insurance companies. Since 1994, the U.

S. Casualty Actuarial Society has been advancing and developing Dynamic Financial Analysis ( DFA ) as a tool that actuaries usage to pattern the complicated and interconnected. The first measure in transporting out DFA is to place the determiners of insurance company public presentation. Some actuarial professional organic structures have suggested that statisticians should see hazard factors that might hold the great impact on company public presentation. For case, Guidance Note 2 issued by the Faculty and Institute of Actuaries in 1996 suggests that statisticians should prove fluctuations in some premises and be alert to some hazard factors when transporting out dynamic solvency proving ( Shiu, 2004 ) .To the writer ‘s cognition, there is no documented survey on determiners of GCC insurance stock market sector. One related survey affecting insurance sector is undertaken in Bangladesh ( i.e.

Belal Uddin, 2009 ) , but the writers confined the determiners to merely general microeconomic factors, without sing alone insurance related steps. Many empirical surveies on insurance sector however can be found on the determiners of operating public presentation or profitableness.The effects of macroeconomic, oil monetary values and microeconomic factors on the motions and volatilities of stock monetary value have been examined by several surveies, but non for the markets considered in this survey. In add-on, and sing that this sector is late introduced in GCC market, based onA there is a deficiency of surveies that identify the factors taking to the alteration in stock market monetary value for insurance sectors in GCC markets. For these grounds, this survey investigates the effects of macro and microeconomic factors on portion monetary value in the Gulf Cooperation Council ( GCC ) states ‘ insurance companies.