The Middle East is one of the most interesting places to invest. With abundant energy reserves and very ambitious plans, the region is set to become an economic powerhouse in the coming decades. For those interested in putting their capital in the Middle East, and in particular in the GCC countries, we analyze its most important stock indices.
The Middle East is one of the most interesting regions in the world. Particularly, if we focus on the Arab world, traditionally considered an energy superpower only.
However, the truth is that the Gulf countries have very ambitious plans with which to develop their domestic economies and reduce their dependence on oil and natural gas exports. And they certainly have resources to finance gigantic investments.
The Arabian Peninsula has a population of almost 90 million people, and growing. This population growth is the result of both a high domestic birth rate and strong immigration rates. As a result, it is a region with a growing working population and few elderly people that need to be supported.
Although its economy continues to depend heavily on the production and export of hydrocarbons, the Middle East enjoys a very dominant position in this sector. This is due, in part, to the increasingly tight restrictions imposed by Western government on the oil and gas business. In other words, there is less competition for the Arab nations.
In addition, a very significant percentage of these revenues is being used to develop the region’s infrastructure and domestic economies. This is taking place with an attractive legal and fiscal framework, with which the Gulf countries are able to take advantage of many of the mistakes that are being committed in the West.
For all these reasons, this region of the world is experiencing very high rates of economic growth. This is seen in virtually every country of the region, including Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman and Bahrain.
For those interested in investing in the Middle East, and specifically in the Gulf countries, we will analyze its most important stock market indices. These indices usually have the acronym GCC in their name. GCC stands for Gulf Cooperation Council, a political organization that includes those 6 countries.
It should be noted that all these countries, despite being quite or very rich, are still considered emerging markets. This is because their capital markets are not yet sufficiently developed.
S&P GCC Composite
The first stock index we will look at is the S&P GCC Composite. It is published by S&P Dow Jones and was introduced in 2006. It is composed of companies from the 6 countries in the GCC.
The number of stocks within the index is not fixed, but fluctuates based on how many companies meet the minimum liquidity and capitalization criteria to be considered. However, it is important to note that it is designed to include many companies. The number of companies in the S&P GCC Composite is around 350. Hence, many of them are rather small.
Within the index, stocks are weighted based on their market capitalization adjusted for free float. This means that the larger ones tend to dominate.
The economic sector with the greatest weight within the index is the financial sector. This is due to the large number of banks in the region. The raw materials and telecommunications sectors are also important.
If you want to read more details about this index, you can visit the S&P Dow Jones website.
MSCI GCC Countries Combined
The American company MSCI calculates the MSCI GCC Countries Combined index for the region. The number of stocks within it also fluctuates over time, but hovers around 80. So it is more concentrated in large and medium-sized companies.
Stocks are also weighted based on free float adjusted-market capitalization. And the dominant sector is banking. Two of the largest banks within the index are Saudi Al Rajhi Bank and Saudi National Bank.
Approximately half of the index’s value comes from Saudi Arabian companies, with the United Arab Emirates and Qatar in second and third place, respectively.
If you want to find more information about the MSCI GCC Countries Combines index, you can visit this link to the MSCI website.
FTSE GCC Extended
Finally, the company FTSE Russell publishes the FTSE GCC Extended index, which was launched toward the end of 2021. In fact, the introduction of this index responds to the greater relevance of this region’s economy within the global economy.
The FTSE GCC Extended is similar to the S&P GCC Composite in that it includes many small companies. In fact, the number of stocks within the index, which fluctuates over time, hovers around 400.
Some of its largest holdings are Saudi Aramco, Saudi Arabia’s state-owned oil company, and National Bank of Kuwait, Kuwait’s largest bank.
You can find more information about the FTSE GCC Extended on its official website.
I hope you found this post about stock market indices for Africa useful. If you want to learn about the most important stock indices in Europe, check out this link:
Top 8 Stock Market Indices in Europe
Finally, I also encourage you to subscribe to my newsletter in order to be on top of what is going on in the financial markets: