The Month of Records

EghtesadOnline: Stocks continued their moribund trading in Tehran's two equity markets during the Iranian calendar month of Azar (ended Dec. 20), while the rial hit historic lows and moved to money markets seeking safety and higher yields.

News ID: ۷۳۸۷۹۰

22 December 2016

Trading on Tehran Stock Exchange and Iran Fara Bourse has plummeted, with market benchmarks making small gains and losses in the past month. Volatility is so low that index performances rarely go beyond 0.2%. However, both markets are near record highs.

While stocks have nothing going for them, interest rates offered by banks are going up, adding to the momentum of capital flight from equities. Future industry prospects remain gloomy, making high returns and lower risk of bank deposits and Islamic bonds irresistible.

Interest rates in bond markets have begun to climb this month and bond yields are paying over 22% per year, IFB data show. Government treasury bonds, though in short supply, yield even higher, close to 24%.

There is another rival to stocks for those who want to take a bigger risk: currencies and gold. Demand for the dollar shot up in Azar, bolstered by its rise to 14-year highs in international markets, sending the greenback to historic highs against the rial.

The US currency surged nearly 10% during the month, breaking above the 40,000-rial per dollar mark on Dec. 21, for the first time since the height of Iran's currency crisis four years ago.

Gold had more moderate gains during the month. A stronger greenback makes dollar-priced gold less attractive to investors, which kept a lid on the precious metal's demand this month.

The Azadi gold coin advanced 3.6% during the month to 11,424,000 rials by the end of Azar. Futures for February delivery gained 2% to 11,575,000 rials during the period.

In the meantime, TSE gained only 1% for the month and its benchmark index TEDPIX finished at 80,122 points. The market did rise to a nine-month high of 81,341 on Dec. 7, following a deal by major world oil producers to curb output and firm crude prices, but the rally did not last as bullish sentiment rapidly dissipated. The rally was led by shares in steel production, mining and refining industries whose export revenues benefit from a strong dollar.

The IFB, on the other hand, held onto its gains from the early December rally and ended the month 4.2% higher at 868.3 points, just off the three-year high it hit on Dec. 10.

Petrochemical companies, which make up a large segment of IFB, gained the most on prospects of higher crude prices.

> Options and Scrapped Deal

There was more drama outside of trading last month. Stock options were introduced on Sunday for the first time in Iran. Call options for Mobarakeh Steel Company, National Iranian Copper Industries Company and automaker Iran Khodro were unveiled at TSE.

Regulators are seeking the introduction of sharia-compliant derivatives to expand investment tools available to money managers and add gusto to Iranian financial markets, according to Financial Tribune.

The Iranian Privatization Organization said it plans to scrap the controversial privatization deal for Telecommunications Company of Iran reached in 2009. IPO sold 50% of TCI to a consortium of three companies, two owned by the Revolutionary Guards Corps and one by the Execution of Imam Khomeini's Order, a state-owned charity, for $8 billion back then. However, the consortium has failed to pay part of the money, forcing IPO to cancel the deal.