Tehran Stocks Return to Safety

EghtesadOnline: Weekly rollercoasters are becoming a familiar sight in Tehran stock markets. In the week before last, positive market signals were conspicuous as trade volume stayed strong compared to the market's recession early in the week.

News ID: ۷۴۵۵۸۷

07 July 2018

Even though parallel markets had no shortage of speculation, developments such as introducing a "secondary" foreign exchange market hosted by the stock market, to some extent checked the rial's downward trajectory and the gold coin's destructive power–all apparently seen as good news for stocks.

The upsides notwithstanding, things turned south Sunday as Tehran Stock Exchange and Iran Fara Bourse's main indices dropped 2.5% and 2.9% in a single day, with steel and petrochemical shares accounting for big declines.

Analysts were quick to opine that the drop was primarily due to investors trying to cash in their profits after a long, healthy rally, and that prices are bound to rise again. Also, a heavyweight initial public offering did not help stem the tide, according to Financial Tribune.

Yet the next two days were straight-up wins as both markets recouped losses and more, with gains slowing down on Wednesday as certain risks regarding large-cap base metals shares kicked in.

The last trading day also saw the Central Bank of Iran announce the "secondary" FX market's launch, but not on the capital market as promised. This, too, played a role in dampening investor sentiment for the day.

Overall, TSE's all-share index TEDPIX, gained 1,165.2 points or 1.04% during the week that ended on July 4 to close at 112,490. This brings the benchmark's return since the beginning of the year (March 21) to 16.8%.

Iran Fara Bourse’s benchmark index, IFX, shed 16.63 points or 1.3% to stand at 1,252.84. The index's year-to-date return hit 14.24%.

> No FX Trading at TSE

The central bank governor, Valliolah Seif, told reporters on Wednesday that the long-expected secondary currency market had officially started trading at negotiated rates, but made no mention of the capital market's role in the process as suggested before.

Tehran Stock Exchange was to host the trading base on a mechanism devised in coordination with the CBI, Ministry of Industries, Mining and Trade, and the Securities and Exchange Organization, head of SEO Shapour Mohammadi had announced earlier.

Yet Wednesday saw no new ticker or market being added to TSE website, much to chagrin of investors.

A SEO official, Mohsen Khodabakhsh, confirmed later that the measure had been scrapped. No reason was given.

"As to why it was cancelled, the central bank must be held accountable as we are not in on the details," Khodabakhsh told Bourse 24.

According to the measure, CBI and the industries ministry were to provide an online list of exporters and importers on a daily basis to the bourse so that trade codes could be created for them.

In turn, they would not have to register their foreign currency earnings in the online Integrated Forex Deals System (known by its Persian acronym Nima) and sell it to importers at negotiated rates.

Now, it seems the new market has been integrated into Nima after all, according to Bourse Press.

There are still no details on the secondary market's dealings and the actual range of the negotiated rates, but parallel markets seem to have reacted favourably, albeit lukewarm.

Reports said the US dollar on the black market was buying 79,500 rials as the week closed to mark a 1,500 rial drop for the greenback.

Bahar Azadi gold coin dropped 600,000 rials on Thursday's close to 26.2 million rials, extending a four-day losing trend. The coin lost a total of 8% last week from an open of 28.5 million.

The rial was also strengthened by 1,910 against the euro on Thursday to end the week at 91,440 EUR/IRR. The European single currency exhibited a similar trend, as the rial grew 5.39% against it during the week, according to the Tehran Gold and Jewelry Union.

> Weekly Trade in Detail

Over 6.9 billion shares valued at $394.3 million were traded on the TSE last week. Both the volume and value dropped a whopping 50% compared to the week before.

TSE’s First Market Index gained 954.1 points or 1.16% to end at 82,608.6. The Second Market Index rose by 1,829.2 points or 0.81% to close at 223,360.

At the IFB over 2.15 billion securities valued at $273.88 million were traded, with the number of traded shares and trade value dropping by 47.3% and 19.2% compared to the previous week respectively.

IFB’s market capitalization also gained $32.1 million or 0.1% to reach $38.9 billion. The cap has grown by 11% since the year began.

Its First Market witnessed the trading of 361 million securities valued at $17.54 million, dropping 47% and 53% respectively.

About 1.77 billion securities valued at $87.7 million were traded in the Second Market, with the volume and value shy 19% and 30%.

Over 10 million debt securities valued at $224.6 million were also traded at IFB, with the number and  value of bonds jumping 93% and 105% respectively.

Yet the volume and value of traded securities dropped 47% and 26% respectively for exchange-traded funds to reach 44 million, worth $18 million.

Trade was also down for the housing mortgage rights’ trade, as it reached 470,000 securities worth $7.69 million, dropping 14% and 13% respectively.