Stock Market Playing Bigger Role in Attracting Liquidity

EghtesadOnline: Almost 1,290 trillion rials ($9.9 billion) has been injected into Iran’s stock market since the beginning of current fiscal year (March 2019) up until December 21, said the Securities and Exchange Organization’s deputy chief for stock markets.

News ID: ۷۴۹۳۳۷

01 January 2020

This amount was channeled by investors trading in the Tehran Stock Exchange and over-the counter market known as Iran Fara Bourse, Mohsen Khodabakhsh told state TV on Monday.

Khodabakhsh underscored the critical role of the stock market in attracting liquidity, which, according to the other host on the TV show, is a product of the budget deficit and government borrowing from the Central Bank of Iran, according to Financial Tribune.

Pointing to the function of various financial instruments in absorbing liquidity, the official said bourse can help channel “people‘s money into productive sectors.”

The ever-increasing volume of liquidity in Iran has become a perennial concern among market pundits, government officials and economic experts. They say if unbridled liquidity is not kept in check by directing it into production units, the end result could be hyperinflation.

The CBI in its latest report showed 25.1% growth in liquidity by the end of third month of the calendar year to June 21 compared to the corresponding month last year.

Liquidity stood at 19,799.1 trillion rials ($152 billion, calculated at open market exchange rates ) in the month,  indicating a 5.2% rise compared to the last month of previous fiscal year (ended March 19, 2019).

The regulator reported annual liquidity growth at 23.1% for the final month of last year when liquidity was 18,828 trillion rials ($144 billion).

The CBI has not published new data on liquidity but the unofficial report put the figure at over 20,000 trillion rials at the end of summer.

The role of stock market in controlling liquidity has gained traction especially after the bourse showed impressive performance compared to rival markets.

The TSE has grown by about 110% since the beginning of the year while currency and gold markets have been mainly sluggish.

SEO head Shapour Mohammadi has announced plans to absorb more liquidity via a variety of measures, such as increasing the number of listed companies, creating investment funds and allowing private companies to attract funds by issuing bonds.