Tehran Stocks in the Green on Liquidity Flow

EghtesadOnline: Tehran’s main stock gauge closed in the black on Sunday to post another all-time high as the deluge of liquidity from small investors keeps propping up the already overheated market.

News ID: ۷۴۶۰۴۲

01 October 2018

A series of back-to-back records for Tehran Stock Exchange's main index, TEDPIX, has had market gurus worried about the sustainability of the rally which they say is no longer backed by fundamental  factors.

TEDPIX climbed 7697.92 points or 4.11% on the second trading day of the week to reach 195104 points as investors looked ahead to new measures expected to stabilize the currency market, the key legislation expected to improve Iran's ties to the global anti-money laundering body, the Financial Action Task Force and underpin Tehran’s complex negotiations with Europe to save the 2015 nuclear deal.

Lawmakers were scheduled to deliver their final view on the bill allowing Iran to join the international Convention for Combating Financing of Terrorism on Sunday, Financial Tribune reported.

According to the Majlis National Security and Foreign Policy Commission spokesperson Ali Najafi Khoshroudi, whose commission has acted as the special body to review the bill, has predicted that the bill will  be endorsed overwhelmingly by lawmakers.

Iran is determined to meet FATF demands in order for its banks to become eligible for working with  global lenders.

As of now, the bill is the only FATF-related bill not approved by the chamber after hardline MPs moved to block its approval in June.

Reports on Sunday, however, said lawmakers had delayed the discussion of the bill until Monday.

Also on Saturday, the government authorized the central bank to intervene in the foreign exchange market to defend the rial after the currency fell to record lows against major currencies.

A top government body, headed by President Hassan Rouhani and the heads of parliament and the judiciary, “gave the central bank governor the authority to manage and intervene in the foreign exchange market.”

Although the rial's slide has been a boon to exporting  companies and a major factor behind the stock market's rally, no one wants further upsurge in currency rates.

Foreign Minister Mohammad Javad Zarif said at the weekend that Iran plans to get around US sanctions on its oil sales by selling petroleum and conducting international trade in currencies other than the US dollar.

“The actual mechanism would be to avoid dollars,” Zarif told reporters at a roundtable at the Iranian mission to the United Nations in New York.

The US is poised to impose sanctions in early November targeting Iran’s oil sector.  Nuclear sanctions were suspended under the deal that the United States and five other world powers agreed to in 2015. But after President Trump announced in May that he was withdrawing from the deal, US officials have pressured countries around the world to stop their oil imports  from Iran to prevent it from its main source of income. They have also threatened secondary penalties if the sanctions are defied.

> Changing Trend

However, outweighing the fundamental factors affecting the equity market in the past weeks is the rush of investors desperate to preserve the value of their assets as fears over the inflation rises.

According to the analytics website Donyaye Bourse, the frenzy for share-buying is no longer motivated by the desire to make profit since almost all shares are facing strong demand.

That is borne out by the fact that in Sunday's trade all the major stocks were in the green and although shares worth 18 trillion rials ($1 billion) were traded on the day, more than 5.4 trillion rials ($31.7 million) was still waiting in line.

By accounting for Sunday's growth, the equity market's value has doubled since the start of the financial year in March, with over 20% of the gains having occurred in the past week.

The stark difference between the trend of the past week and the six months preceding it is that stocks are no longer rated and differentiated by investors. The holistic approach where investors are painting all shares with the same brush is precisely the reason why experts seeing ominous signs over the horizon.

>Markets Performance

Tehran Stock Exchange’s main index gained 7,697.94 points or 4.11% on Sunday to end trading at 195,104.

About 4.81 billion shares valued at $112.82 million changed hands at TSE for the day.

Trading on the TSE and Iran Fara Bourse starts on Saturday and ends on Wednesday.

Jam Darou Co. was the biggest winner as its shares went up 42.58% to 11,536 rials per share.

Pars Ceram Company incurred the biggest loss among all TSE-listed companies and went down 3.31% to 6,828 rials per share.

Golgohar Mining and Industrial Complex gave the biggest boost to the benchmark index, followed by Persian Gulf Petrochemical Industries Company, and Isfahan Oil Refining Co.

Pakshoo Industrial Group was the biggest laggard behind the benchmark's fall, followed by Iran Transfo Company, and Iran Tractor Manufacturing Forging Company.

The Price Index gained 2,249.91 points to close at 57,022.6.

The First Market Index was up 6,232.23 points to post 144,098.2.

The Second Market Index added 12,639.91 points to reach 386,826.9.

The Industry Index increased by 7,106.02 points to register 178,075.

The Free Float Index was up 8,509.49 points to hit 208,159.66.

The TSE 30 went up 411.11 point to settle at 9,368.9 and the TSE 50 ended 337.23 points higher to finish at 8,386.6.

> IFX Up 3.61%

Iran Fara Bourse’s main index IFX gained 77.7 points or 3.61% to close Sunday trade at 2,228.6.

About 1.1 billion securities valued at $37.46 million were traded at the over-the-counter exchange for the day.

Bank Day had the highest number of traded shares as 149.68 million of its shares changed hands.

Pars Paper Industries Group registered highest trade value as $1.54 million worth of its shares were traded.

Alborz Distribution Company, Iran & Shargh Leasing Company, and Parvardeh Tabas Coal Processing Company registered the highest value increase.

Marun Petrochemical Company, Zagros Petrochemical Company, and Esfahan Steel Co. had the most positive impact on IFX.