Capital Market Performance Appraised

EghtesadOnline: The Economy Ministry has reported the performance of the domestic capital market in the year ending August 2020.

News ID: ۷۵۰۸۴۶

01 September 2020

It said the capital market had grown dramatically largely due to a package of measures that, among other things, target expansion and add diversity to trading instruments.

The number of listed companies at the Tehran Stock Exchange and the junior equity market rose from 611 in August 2019 to 636 companies in August 2020, according to the report published on the ministry news portal shada.ir.

Listed companies generated 220 trillion rials ($956 million) via initial public offerings in the period.

Foreign investment in Iran’s equity market rose to 44.7 trillion ($191m) as of July 21 compared to 8.13 trillion rials ($35m) in August 2019.

A large number of listed companies got permits from the Securities and Exchange Organization, the stock market regulator, to reshuffle their capital structure. Assorted companies were allowed to reevaluate their assets to the tune of 547 trillion rials ($2.3 billion) by issuing new shares.

Stock market officials undertook a series of reforms last year to improve the efficiency of the market, including an overhaul of regulations that govern listing companies and issuing bonds. Changes mainly included easing the listing process.

The regulator recently decided to cut the bourse trading fee to reduce “investment costs” and encourage investors to enter the bourse.

The SEO said it cut trading fees in the stock market by 20% and the new rules took effect July 22.  In the past investors paid 1.5% in trading fee for conducting any trade via the stock market.

As per the new rules, 30% of the trading fees will be deposited with the Capital Market Development Fund everyday by the TSE, IFB and Central Securities Depository of Iran, pillars of Iran’s share market.

The fund is a prominent mutual fund in terms of resources and is assigned with the task of supporting stock markets and safeguarding the interest of investors.

Iran’s stock market has seen a deluge of investors with the number of trading codes rising to 15.25 million by August 2020, up from 9.086 million in the same month last year.

Thanks to the fresh capital, the TSE’s main index, TEDPIX, posted an unprecedented 615% growth in one year rising from 266,127 points in August 2019 to 1,727,953 points on Monday (August 31).

Regarding commodity-based exchanges, namely Iran Energy Exchange and Iran Mercantile Exchange, the report points to the launch of future contracts for farm products at the IME and selling Islamic bonds via IRENEX to fund energy (oil and electricity) projects.

ETFs and Justice Shares

The ministry report points to the government initiative to sell its shares in state-run companies via exchange traded funds as a stellar performance of the capital market last year.

Selling shares via ETFs is part of the government’s effort to raise funds for budgetary needs. So far it has sold shares in three banks and two insurance companies.

There is a plan based on which government shares in four refineries are to be ceded via another ETF. The value of government shares in refineries is estimated at 600 trillion rials ($2.6b).

In addition, the government in April eased restrictions on trading the so-called Justice Shares, allowing shareholders to sell a portion of the shares in the stock market.

Justice Shares are shares of government-owned companies that were given free to the six lowest income deciles in 2005.

More than 49 million Iranians have Justice Shares and reports say the total value of these shares is 3,000 trillion rails ($13b).