Sub Sector Indices and Crude Oil. Gold, Market Return

exchange field Indices and Crude Oil. amber, Market ReturnCHAPTER 1INTRODUCTION1.1 IntroductionThe world-wide egregious anele terms has been seen a sharp change magnitude in recent years and has been widely reported in the day-by-day news programpaper or TV news. For fount, popular business and pecuniary US based website Bloomberg has been constantly providing breaking news headlines like The jumpy embrocate hits to level of $ 120 per barrel or Crude Oil Increases to 25-Month High as Commodities Gain. Besides, video clips be uploaded on the website with commentary by senior investment analyst on the last traded pugnacious petroleum color color monetary value with prominent TV host. It has been n mavind that rising megascopic crude crude oil prices has created jittery and uncertainty in the financial marketplace. For example, some(prenominal) negative news on price increase or disruption to oil supply departing draw ph unrivaled line market indices like Han g Seng Index, Nikkei 225, STI (Straits Times Index), shanghai multiform, Seoul involved, and others regional markets to fall sharply knee jerk reaction from the investors on panic selling .Theoretically, soaring of crude oil prices exit cause splashiness and inadvertently would cause interest rank to go up. Consequently, this would impact discordant segments of the financial market especially the gun phone line market. It has been argued that continues rising on worldwide oil price will eventually erode the company profit margin. Basher, Haug, and P. Sadorsky (2010) fix that oil price can afford-to doe with prices directly by impacting afterlife cash flows or indirectly through an impact on the interest rate used to discount future cash flows along with in the absence of complete substitution effects amid the factors of production and rising oil price. For example, there would be an increase in the approach of doing business as cost of with child(p) will increase. In financial terms, discounting the free cash flow with the higher(prenominal) discount rate (cost of capital) will cause the fair value of beginning price valuation to decrease significantly from previous valuation. J.Happonen (2009) in addition highlighted that spiking high prices on crude oil will affect greatly the poor as fuel costs be or so significant in food production and transportation cost. High oil costs excessively hit various economies on a macro-level. Commodity analysts employ various graphemes of methodology e.g. fundamental or technical analysis to forecast the future trend of the crude oil price meanwhile investment bankers start to develops and launches a new commodity mutual fund or unit trust products to attract attention on the public. As a precaution and in order to nurture their investment, risk adverse investors are moving their assets into the safer assets like precious metal, e.g. funds, silver and etc. fit in to Basher Sadorsky (2006), oil is th e lifeblood of modern economies. When growth of Growth Domestic Product (GDP) of the countries are rapidly increase like BRICs (Brazil, Russia, India, and China), fare demand oil of the countries will increase significantly. There is a dogmatic resemblanceship between the crude oil price and global deluxe price trend in the market. The linkage of gilt between the risings of crude oil price has been investigated and semiempirical studies show that the two commodities are correlated each others. P. Narayan, S. Narayan and Zheng (2010) examine the long-run affinity between gold and oil spot and futures markets at different levels of maturity and found a significant positive correlation between crude oil and gold price.The most oil adducers Organization of the Petroleum Exporting Countries (OPEC) members are from Islamic country such as Iran, Iraq, Saudi Arabia, Libya, and etc. Based on the Islamic historic studies, Islamic law is forbids the use of a promise of payment such as fiat money USD dollar acting as a medium of exchange. Thus, most of members try to diversify their vast US dollar revenue holding into precious metals e.g. trade in gold Dinar and Dirham. The concept of Gold Dinar System was mooted out by our former Prime Minister Malaysia Tun Dr. Datuk Seri Mahathir on year 2002 before. The purpose of adopted the gold Dinar and Dirham is to equal the solely currency for international trade and prevent the Asia currency crisis 1997 to happen again. Meanwhile, some of the members also refused to accept USD as currency trade on the crude oil like Iran and Venezuela project been pushing for a switch to the euro to protect the value from further losses. This caused by US government adopted the ease fiscal policy on keep printing their money to curb the recession providence. Ultimately lead to USD dollar depreciated value relative with the Middle East oil producers currency.1.2 Problem StatementOil has been an important commodity and influences the economic activities of the country. On the other hand, gold has been used as important hedging tools to hedge against inflation which among others has been caused by rising oil prices. At present, with the present escalating oil prices, the world economy is grappling to contain inflation and ensure that the economic growth is non derailed. As a result, commodities like crude oil and gold has been a subject of studies by academics in various countries.Gold has been used as a good indicator of expected inflation in the market while oil is a barometer for deflation. Thus, when inflation is expected, investors will divert their asset to the gold portfolio to protect their asset value. On the other hand, when deflation is expected investor will reallocate their funds and start to buy safer government bond. This reaction can partially be explained by behavioral finance whereby the investor is irrational and market is an imperfect.A large body of empirical enquiry has been conducted on th e impact of oil prices and other macro variables with relation to the linage market. Wang, CP. Wang, and Huang (2010) attempt to establish the familys among oil price, gold price, exchange rate and international line market. They investigated the fluctuations in crude oil price, gold price, and exchange rates of the US dollar against other various currencies on the stock price indices of the United States, Germany, Japan, Taiwan and China respectively, as well as the long and abruptly correlations among these variables. G. Sharma, A. Mahendru, (2010) studies on the impact of macro-economic variables on stock prices in India. In Malaysia, Shaharudin and Hon (2009) extended the research to investigate the stock extradite in relation with firms size and macroeconomic variables (Consumer Price Index, Industrial Production Index, Money Supply, Interbank Money Market Transaction, trine months and six months Treasury Bills Discount Rate and crude oil prices) and found that stock ret urn were significantly influenced by selected macroeconomic variables.Based on the importance of two commodities prices and gold, this paper is attempt to investigate and resumeress the significant level of consanguinity between the commodities and the selected 10 major sub-sector components indices in FBM Kuala Lumpur composite Index (KLCI). There see been limited researches studies on the different degree of impact of the crude oil price, gold price, market return, and short-term interest rate against sub-sector components index. A small number of studies were mainly victimization stock index FBM Kuala Lumpur Composite Index (KLCI) as the general proxy for overall performance of stock market. However, the stock index consist a numbers of sub sector components index in FBM Kuala Lumpur Composite Index (KLCI) it may not be a true fallive of a particular contribution of a sector to the overall stock market index. Thus, in our research will studies on these and examine the degree of significant level for commodities impact to a particular sub sector composite index.1.3 impersonal of the StudyThe main objective of the fill is to examine the relationship of majors sub-sector indices between the crude oil prices, gold prices, market return, and short-term interest rate. The lead will includes the examination of correlation between sub sector indices and 4 other variables as mentioned earlier. A sub-analysis on the gold oil ratio will also be conducted. Gold oil ratio is a barometer of economic vibrancy and when times are good the ratios indicator remains low and these reflect a relatively robust priceand demandfor crude oil. When fear is pervasive or the economy slumps, the ratio is high, as gold is chased by investors looking for a safe stick outn. In other words, this would infer that when the current ratio is below the benchmark, gold price is either too cheap or crude oil is too expensive. When the ratio is greater than benchmark, it will mean otherwis e.1.4 Significance of the StudyThe economies of the world are now integrated in terms of trade and capital flows with formation of global network across different region. As such, when financial crisis occur, it will have systematic effect throughout the world. A clear example is the occurrence of U.S. Sub-prime crisis which happened in 2009 and present year Euro Zone Debt Crisis was created contagion effect to the global economy. With advancement of technology and innovation of financial product, risk adverse investors should be to a greater extent alert on the important signals or indicators as a guide to monitor and time the market to avoid any unexpected risk.The fuck off of this paper is to study the relationship of oil prices, gold price, market return, and short-term interest rate on majors selected sub-sector index. The results on this study will add to the body of knowledge and assist policymakers like Bank Negara Malaysia as well as pratictioners such as corporate manager s and investors to participate in the stock market. It also enhance their understanding on the level of impact on the four (4) variables to the selected sub-sector indices.The trade price theory (APT) postulates that every investor believes that the stochastic properties of returns of capital assets are invariable with a factor structure. For the purpose on this study, the APT precedent was adopted in evaluating the major sub-sector components indices relationship with various macroeconomic risk factors. The conclusion of the study shall enrich investor understanding on some sub-sector industries relationships to macroeconomic risk factors. Thus, smart investors still have a chance to explore it and gain return on that sub-sector industries.1.5 Definition of TermsKLSE (Kuala Lumpur Composite Index)The FBM Kuala Lumpur Composite Index (KLCI) is used as a proxy for the performance of the Kuala Lumpur Stock Exchange and comprises the largest 30 companies listed on the master(preno minal) Board by full market capitalisation that meet the eligibility requirements of the FTSE Bursa Malaysia Ground Rules. The two main eligibility requirements stated in the FTSE Bursa Malaysia Ground Rules are the free gasconade and liquidity requirements.London Bullion Market (LBM) (U$ Troy Ounce) priceIndex shows the performance of gold prices over time per troy ounce. The troy ounce is a weight measuring stick for precious metals, which is still used in the Anglo-American zone. It is named for the French city of Troyes.Crude Oil WTI (West Texas Intermediate)Known as Texas light sweet, is a type of crude oil used as a benchmark in oil determine. It is a light (low density) and sweet (low sulfur) crude oil. It is the underlying commodity of in the buff York Mercantile Exchanges oil futures contracts.T-Bill band 4T-Bill band 4 is type of money market factor. The Malaysian Treasury Bills (MTB) issued by the profound Bank of Malaysia are tradable on yield basis (discounted rat e) based on bands of remaining tenure (e.g., Band 4 = 68 to 91 days to maturity). The standard trading heart is RM5 million, and it is actively traded in the secondary market. This instrument represents the short-term interest rate in the Malaysia money market. The high or low interest rate will make bonds look more attractive than stock and consequently impact the stock price return.Sub-sector Price IndexMajor sub-sector prices index are the 10 majors sub-sector price index consist of Consumer, Plantation, Finance, Trading and Services, Industrial, Industrial Products, Construction, Mining, Properties, and Technology. Each index is representing overall performance instituted on sub-part of FBM KLCI index.CHAPTER 2THEORETICAL FRAMEWORK AND writings REVIEW2.1 IntroductionThis chapter provides a comprehensive review on the empirical evidences on four (4) variables and the theories on Arbitrage pricing Theory (APT) model and economic Market Hypothesis (EMH). It will provide a better understanding of the relationship between variables and sub-sector component indices performance.2.2 Macroeconomic FactorsChoo, Lee and Ung (2011) investigates the behavior of Japanese stock market excitability with respect to a few macroeconomic variables including gold price, crude oil price and currency exchange rates (Yen/US$). The authors using the performance of GARCH models and Ad Hoc methods to carried out a comparison study.Their results show that macroeconomic variables used in this study have no impact on the volatility of Japanese stock markets and the simplest GARCH (1, 1) model yields the best result. Maysami et al. (2004) study on relationship between macroeconomic variables and stock market indices co-integration Evidence from Stock Exchange of Singapores All-S Sector Indices and based on the study concludes that the Singapores stock market and the property index form co-integrating relationship with changes in the short and long-term interest rates, industrial prod uction, price levels, exchange rate and money supply.2.3 Crude oilBased on the past study from Huang et. Al, (1996), they found that oil future returns do not have much impact on SP 500 Index. On the other hand, Al-Rjoub,Samer Am* (2005) investigated the effect of oil price shocks in the U.S. for 1985-2004 using VAR Mixed impulsive and Granger Causality Approaches to study the whether the U.S. stock market react to the oil shocks, a big importer of crude oil. They found that from VAR suggests that oil shock affect the stock market returns in the U.S. oil price are important in explaining the stock market reactions. According to Basher Sadorsky (2006), oil is the lifeblood of modern economies and can have significant impact on the growth of a countrys economy.In addition, Driesprong, Jacobsen and Maat (2004) found that investors in stock markets under react to oil price changes in the short run. Recent study by Charles (2009) found that higher volatility in both gold price and oil price reduces volatility of stock price. about studies directly screen outed the relationship between oil prices and stock values. Huang, Masulis and Stoll (1996) applied vector autocorrelation models to find the time-series relationship and concluded that crude oil futures lead stock prices of oil companies. However, they were unable to bring a conclusion for any significant relationship to other stock prices. In addition, the volatilities of crude oil futures lead the volatilities of oil industry stock index. A related study (Sadorsky, 1999) had different conclusion. It showed that oil prices as an important factor which predicts stock prices very well. Sadorsky (2003) used vector autocorrelation model to verify the importance of oil price, federal fund rate, CPI, foreign exchange as variables to describe the performance of technology stock prices.Hamilton (2008) examines the factors responsible for changes in crude oil prices and the statistical behavior of oil prices. The stud y includes the role of commodity speculation, Organization of the Petroleum Exporting Countries (OPEC), and resource depletion and found that although scarcity rent make a negligible contribution to the price of oil in 1997, the situation at present would be different and crude oil prices might fun an important role.2.4 GoldMelvin and sultan (1990) consider a different approach of establishing the relationship between gold and oil markets. Their study was based on the conditional relation of the gold prices through the export revenue channel. As gold is an integral part of the international reserve asset of several countries, including the oil producing countries, their finding smash that stock shock will leads to expectations of official gold purchases and this in turn will make the expected future price of gold to soar higher. Sultan (1990) argue that when oil price rises, the oil exporters countries will benefit in terms of higher oil revenues. This in turn may have implicatio ns on the price of gold especially when the gold consists of a significant share of the asset portfolio of oil exporters (relative to other nations) and oil exporters purchase gold in semblance to their wealth. The impact on this will lead to an increase in demand for gold and subsequently rise in price of gold and ultimately an oil price rise leads to a rise in gold price.Ismail et al. (2009) develop a forecasting model for gold prices using Multiple Linear arrested development Method to predict gold prices based on economic factors such as inflation, currency price movements and others. They argue that investor starts to invest their asset in gold because of depreciation of US dollar currency and gold as an important stabilizing role for investment portfolios. based on their findings, they conclude that many factors modulate the price of gold and several economic factors such as Commodity Research Bureau future index (CRB) USD/Euro Foreign Exchange Rate (EUROUSD) puffiness rate (INF) Money Supply (M1) New York Stock Exchange (NYSE) Standard and Poor 500 (SPX) Treasury Bill (T-BILL) and US Dollar index (USDX) were considered to have influence on the gold prices.2.5 T-bill (short term interest Rate)T-Bill rate is a benchmarking for short-term interest rate and is deemed as risk free. As such, T-Bill rate is usually interpreted into consideration for financial valuation purpose and widely used by financial institutions and academics especially to determine the fair value of stock pricing. Chan et al. (1992) reaffirmed that the short-term riskless interest rate is one of the most fundamental and important prices determined in financial markets.In referred to Damodaran (2002) published textbook Investment rating Tools and Techniques for Determining the Value of Any Asset, Choice of risk-free security the returns on both Treasury bill (t-bills) and treasury bonds (t-bonds), and the risk aid for stocks can be estimated relative to each other. This was based on the yield curve in the US that has been on upward-sloping for most of the past seven decades. The risk premium is larger when estimated relative to short-term government securities (such as Treasury bills). Damodaran (2002) also stated that the risk risk-free rate chosen in computing the premium has to be consistent with the risk-free rate used to compute expected returns. So, if the Treasury bill rate is taken into consideration as a risk-free rate, the premium has to be pull in by stock over that rate. This applies to the Treasury bond rate as well and premium has to be estimated relative to that rate. He also mentioned that for the most part, in corporate finance and valuation, the risk-free rate will be a long-term default free (government) bond rate and not a Treasury bill rate. Thus, the risk premium used should be the premium earned by stocks over Treasury bonds.2.6 FBM Kuala Lumpur Composite Index (KLCI)The FBM KLCI is taken as a proxy to represent the market growth op timal portfolio. This research paper attempt to construct and compare various total-return world stock indices based on daily data. The data was equanimous from DataStream Advance cover the period from 01 January 1973 to 31 August 2006. Due to the diversification, these indices are noticeably similar. This proposed method of constructing a proxy for the growth optimal portfolio has specific advantages over the methodologies of diversity weighting and market capitalization weighting. The diversified world stock index has applications to derivative pricing and investment management.Petttengill et al. (1995) developed a conditional relationship between return and beta that depends on whether the excess return on the market index is positive or negative. When the excess return on the market index is positive (negative), there should be a positive (negative) relationship between beta and return. Their empirical results support the conclusion that there is a positive and statistically si gnificant relationship between beta and realized returns. Furthermore, consistent with Hodoshima et al. (2000), the results are similar when the test is done on 20 beta sorted portfolios. However, it seems that the negative relationships during down market are steeper in Tokyo Stock Exchanges (TSE), which seems to have contributed to have negative rewards for holding beta risk in the long run. Consistent with the findings of Pettengill et al. (1995) in the USA and Hodoshima et al. (2000) in the Tokyo Stock Exchange (TSE), the result found that there is a significantly positive relationship between portfolio beta and portfolio return during up markets and the relationship is significantly negative during down markets. Moreover, the test of one-on-one stock return shows that this conditional relationship can even be seen in unmarried stock returns. That is, there is a significantly positive (negative) relationship between individual stock beta and individual stock return up (down) m arkets. However, the results of the study suggest that the beta-return relation, in the Tokyo Stock Exchange (TSE), seems to be negatively steeper during down markets, which seems to have contributed to have a negative reward for holding beta risk even in periods where the average market excess return is positive. Therefore, in conclusion, the results suggest that, though the slopes during down markets seem to be steeper than up markets, there seems to have a conditional relationship between beta and return, which justifies the continued use of beta as a measure of market risk.2.7 Arbitrage determine Theory (APT)The Capital Asset determine Method (CAPM) is a single factor model it specific risk as a function of scarcely one factor, the securitys beta coefficient. CAPM has been considered as one of the main tools to study for the risk-return trade-off assets. CAPM has been widely referred and used in academic research and business financial studies. As long as the return for any asset is interrelated to one variable with its market beta, or the systematic risk, it is defined as the covariance of an assets return and the market return. CAPM implies that expected returns and market beta exists, and only market beta that efficiently exanimate the time series and cross-sectional tests for asset returns.CAPM has its restrictions, assume investors are rational and based on several assumptions that were not practical in the real world. According to empirical studies by Fama and MacBeth (1973), there are several variables e.g. the market value of equity ratio (MVE), the earnings to stock price ratio (E/P), and the book-to-market equity ratio that having greater influence compare to market beta. Another study was carried out by Ross (1976) on the Arbitrage Pricing Theory (APT) which was considered a new modeling for CAPM. Ross refute through Arbitrage Pricing Theory (APT) that market beta is not the only variable to measure the systematic risk. There are multiple va riables that have an effect on the stock returns beside market beta. The study tested on systematic, unconditional, and positive trade-off between average returns and beta.Perhaps the risk-return relationship is more complex, with a stocks required return a function more than one factor. For example, what if investors, because personal tax rate on capital gain are lower than those on dividends, value capital gains more highly than dividends. Then, if two stocks had the same market risk, the stock paying higher dividend would have the higher required rate of return. In that case, required returns would be a function of two factors, market risk and dividend policy. The Arbitrage Pricing Theory (APT) can include any number of risk factors. So the required rate of return could function of two, three, four or more factors. The Arbitrage Pricing Theory (APT) is based on complex mathematical and statistical theory that goes far beyond the scope for discussion in this paper.Even though the Arbitrage Pricing Theory (APT) model is widely discussed in academic literature, the practical usage to date has been limited. The concepts of Arbitrage Pricing Theory (APT) which assume that all stocks return depend on only three factors Inflation, industrial productions, and the aggregate degree of risk aversion (the cost of bearing risk, it was assume that this will be reflected in the spread between the yields on Treasury and low-grade bonds). The primarily theoretical advantage of the Arbitrage Pricing Theory (APT) is that it permits several economic factors to influence individual stock returns, whereas the CAPM assumes that the effect of all factors, except those unique to the firm, can be captured in a single measure fewer assumptions than the CAPM and hence is more general.effective Market Hypothesis (EMH)The Efficient Market Hypothesis (EMH) was developed by Professor Eugene Fama. He said that an efficient capital market theory is one in which security prices adjust rapidl y to the arrival of new information and, therefore, the current prices of securities should be reflected all information about the security. In simple terms, it agent that no investor should be able to employ readily available information in order to predict stock price movements quickly enough so as to make a profit through trading shares. If markets are efficient, stock price will rapidly reflected all available information. There are different types of information available to incorporate into stock prices. Financial theorist have been developed the three form of market efficiency. There are three common forms in which the efficient-market hypothesis is commonly statedweak-form efficiency, semi-strong-form efficiency and strong-form efficiency, each of forms has different implications for how markets work.In weak-form efficiency, future prices cannot be predicted by analyzing prices from the past. The abnormal return cannot be earned in the long run by using investment strategie s solely depend on historical data share prices. Moreover, technical analysis techniques will not be able to consistently produce an abnormal profit, though some forms of fundamental analysis may still provide excess returns.In semi-strong-form efficiency, it is implied that share prices adjust to publicly available new information very rapidly and in an unbiased fashion, such that no excess returns can be earned by trading on that information. Semi-strong-form efficiency implies that neither fundamental analysis nor technical analysis techniques will be able to reliably produce abnormal return. However, in strong-form efficiency, share prices reflect all information, public and head-to-head, and no one can earn excess returns. If there are legal barriers to private information becoming public, as with insider trading laws, strong-form efficiency is impossible, except in the case where the laws are universally ignored.CHAPTER 3RESEARCH METHODOLOGYThis chapter provides an outline of the research process designed to investigate the relationship between economic variables and Sub-sector price index.3.1 The DataIn this section, we will summarize our models data and present the methodology of our model. The daily data for interdependent and dependable variables e.g. FBM KLSE (Kuala Lumpur Composite Index), T-Bill band 4, Crude oil WTI (West Texas Intermediate) price, London Bullion Market (LBM) (U$ Troy Ounce) price, and Sub-sector Price Index are collected from the DataStream and cover from period 17/04/2000 to 18/04/2011. There are 2610 daily observations obtained from DataStream. The data set is given in the Appendix of this paper. In relation on this, dependable variable are consists of ten (10) majors price index e.g., Consumer Product, Plantation, Finance, Trading and Services, Industrial, Industrial Products, Construction, Mining, Properties, and Technology.As can be seen from figure 1, there is an increasing trend on global gold price and reached its the h ighest point, $ 1,492.06, on 18th April, 2011. The gold price was tending to increased since year October, 2008. We believe this trend will continues increasing due to strong demand and short supply gold in the commodities market. Moreover, some expertise research firms like GFMS, a leading global precious metals consultancy, released its 2011 Gold Survey and GFMS expects that gold will reach $1,600 by the end of 2011.Another independent variable, Crude oil WTI (West Texas Intermediate) price known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing. As refer to figure 2, the oil price increase significantly during year 2007 and the reasons behind can be explained by the Asian growing demand on oil to sustain their economy growth. The past researchers also been reported, that oil consumption in India was increased approximately 8.7% according 1998 and 6.5% according to 2006. Mehmet Eryigit (2009) has studied and found that in year 2007, USA has been consu med the 23.9% of the total oil, however total share of the world oil consumption for China, India and Turkey in 2009 is only accounted 13.4% (China consumed 9.3%, India consumed 3.3%, and Turkey consumed 0.8%). Meanwhile, back to middle of year 2008 Sub-prime crisis was happened in U.S financial system and the crude oil price has reached to a minimum price $31, that is a minimum last trader price was reported since year 2004. afterwards decreasing trend along the year 2008, early of 2009 crude oil price are at the recovery stages and maintained a reasonable price between $ 65 -$ 100 per barrels. We expect the crude oil price bullish will continue increasing.The next independent variable is Market returns FBM Kuala Lumpur Composite Index (KLCI). The Kuala Lumpur Composite Index (KLCI) is used as a proxy for the performance of the Kuala Lumpur Stock Exchange and comprises the largest 30 companies listed on the Main Board by full market capitalization.The last independent variable is T-Bill band 4. T-Bill band 4 is type of money market instrument. The Malaysian Treasury Bills (MTB) issued by the Central Bank of Malaysia Are tradable on yield basis (discounted rate) based on bands of remaining tenure (e.g., Band 4 = 68 to 91 days to maturity). This instrument are represents the short-term interest rate in the Malaysia money market. The high or low interest rate will make bonds look more attractive than stock and consequently impact the stock price return.Figure 1 London Bullion Market (LBM) (U$ Troy Ounce) PriceFigure 2 Crude Oil WTI (West Texas Intermediate) Price3.2 Conceptual Framework1. Crude Oil WTI2. London Bullion Market (LBM) (U$Troy Ounces)3. KLSE (Kuala Lumpur Composite Index)4. T-Bill Band 4Sub Sector Price IndexConsumer Product,Plantation,FinanceTrading and Services,Industrial,Industrial Products,Construction,Mining,Properties, andTechnology.The conceptual framework of this study was derived from literature review where proven macroeconomic variables like FBM Kuala Lumpur Composite Index (KLCI) are used as independent variables. The Crude oil WTI (West Texas Intermediate) future contract price, London Bullion Market (LBM) (U$ Troy Ounce) price, and T-bill band 4 had been widely used in evaluating a significant statistical rel