Share Market Playing Bigger Role in Economy

EghtesadOnline: The Ministry of Economy says that the capital market has expanded its role in contributing to the economy thanks to the share market and rise in the number of investors.

News ID: ۷۵۱۲۸۹

18 October 2020

Businesses and listed companies in the stock market generated 2,715 trillion ($8.48 billion) in the first five months (March 20-August 21) of the current fiscal year. This was an unprecedented increase of 632% compared with the market performance in the same period last year, according to the ministry’s news portal, Shada.ir.

The report ascribes the astronomical growth to increasing participation of retail traders and concerted government efforts to expand the market.

Data from the Central Securities Depository of Iran indicate that the first six months of the year saw a flurry of new investors in the stock market unheard of in the 53-year history of Iran’s bourse.

More than 8.83 million codes were issued for investors by the CSDI in the first half of the year, an unusual number compared to the less than 12 million issued in more than a half a century.

The ministry said the value of trade has increased in proportion to the rising number of investors. Average daily trade was 250 trillion rials during the heydays of stock market in the month to July 21, indicating eleven-fold increase compared to the same period last year.

The Tehran Stock Exchange entered a steep correction phase in mid-August after gaining about 270% in the first five months the year.

Investor interest was whetted by major government plans, such as a divestment scheme ceding government shares via exchange-traded funds, and a plan to remove the ban on trading the so-called  ‘Justice Shares’.

Justice Shares are shares of big government-owned companies given to the six lowest income deciles a decade ago. The shares were given free and were not tradable until May.

Despite the growing role of the stock market in funding the struggling economy, observers say Iran’s economy remains over dependent on the banking industry whose poor performance of has come under regular criticism from economists across the spectrum. It would not be farfetched to describe the economy as bank-oriented.

There are growing calls for transition from a bank-based economy to a capital-based system, due to the inability and unwillingness of banks to lend.