TSE Benchmark Ends Monthly Trade Lower

EghtesadOnline: Stocks had a rollercoaster ride in the Iranian month that ended Feb. 19. Tehran Stock Exchange’s main index lost 669 points or 0.7% during the month to end at 98,148.5. TEDPIX reached its all-time high of 99,522.1 on Jan. 24.

News ID: ۷۸۱۸۴۱

24 February 2018

The benchmark index of the over-the-counter market Iran Fara Bourse grew by 14 points or 1.4% during the month to close at 1,098. IFX, too, was at its highest on Feb. 14 as it hit 1,107.76.

Over 22.27 billion shares valued at $1.37 billion were traded at TSE over the month, with the number of traded shares dropping 5% while monthly trade value grew by 10% compared to the month before.

TSE's First Market Index shed 729 points or 1% to stand at 69,818.6. The Second Market Index gave up 84 points or less than 0.01% to reach 208,478, according to Financial Tribune.

At IFB, more than 7.34 billion securities valued at $949.9 million were traded, indicating a 64% growth in traded shares and 34% drop in trade value compared to the month before.

Twenty-four TSE industries posted a downtrend during the period under review and only 11 recorded growth. Base metal and oil product indices, the TSE’s main drivers for the past few months, dropped 1.2% each.

Wood products, paper products and machinery manufacture were the top three growing TSE industries with 40%, 9.1% and 3.8% growth respectively.

Communications equipment, agriculture and insurance incurred the biggest loss with a 9.2%, 8.3% and 6.5% drop respectively.

Communications, real estate and retail were IFB’s top three industries with a 6.5%, 4% and 3.9% growth respectively. The OTC market’s biggest losers were industrial contracting, sugar and pharmaceuticals with losses amounting to 9%, 6% and 5% respectively.

> Forex Gain, Equities Pain

TEDPIX experienced four days of solid uninterrupted growth at the beginning of the month to hit a record. It could not sustain the momentum, however, as the month’s second week witnessed a freefall below the 98,000 level. Limited fluctuations in the remainder of the month failed to revive growth and the index closed lower than it started.

Yet, the foreign currency market was all a twitter. The US dollar’s rally against the rial started in the second week of the month, and continued even stronger up to the last week despite a nosedive on Feb. 7. At the height of its volatility, the rial was traded at 49,000 against the greenback, having plunged 14% since the start of 2017.

Despite the positive signals of a weaker currency for equities, traders chose to wait and see as erratic forex movements coupled with a global uncertainty in base metal and oil prices created an atmosphere of uncertainty.

Our sister publication Donya-e-Eqtesad economic daily's analysis has it that bears returning to the market can be seen as normal after months of growth, as a rebound is expected in the medium term.

Any solid growth, however, would require continued positive signals from the global commodity and local FX markets, as well as low interest rates and diminishing systematic risks.

> The Return of High Interest Rates

The US dollar lost its momentum on Feb. 20 as the Central Bank of Iran intervened with a rescue package reversing loose monetary policies implemented in September, which forced banks to reduce their deposit and lending rates.

CBI’s package included authorizing banks to offer interest rates of up to 20% (5% higher than the September cap) on one-year deposits for two weeks.

According to economist and CBI insider, Pouya Jabal-Ameli, the package reduced demand for foreign currency as investors came out in droves to move their deposits into long-term accounts.

The package, which also included the issuance of rial-denominated foreign currency bonds and offered gold coins at attractive prices, was not well-received by everyone in the economic sector.

Chairman of Majlis Economic Commission Mohammad Reza Pour-Ebrahimi described the move as a step backward, arguing that it terminates all the efforts aimed at reducing rates.

The lawmaker also emphasized that the sudden rate increase would be a blow to the stock market’s growing index, ultimately raising the cost of lending for businesses.

Rising interest rates will siphon liquidity away from stocks and simultaneously dampen FX demand and growth. Coupled with the systematic risks such as the fate of the 2015 nuclear deal, investors’ sentiment is expected to remain dented.

> IFX Beats Other Markets in Monthly Gain

TEDPIX could barely hold its own against gains in the forex and gold market in the Iranian month ending Feb. 19. IFX, on the other hand, proved a worthy opponent.

IFX overtook euro in monthly gain to take the first place, with US dollar, Bahar Azadi gold coin and TEDPIX coming next.

However, euro has had the biggest gain as of the beginning of the current fiscal year (March 21, 2017) followed by TEDPIX, IFX, gold and US dollar.

TEDPIX has posted a 27% gain so far this year, while the rate stood at 25.5% for IFX.

The rial was quoted at 57,190 against euro by the month’s close, marking a 1.25% growth for the currency.

Euro’s gain so far this year reached 39%, having started the year at 41,120.

The US dollar gained 0.92% against the rial this month to 45,750. Its gain so far this year has reached 22.06%, having started the year at 37,480.

As for gold, Bahar Azadi gold coin dropped 0.4% last month to 14.6 million rials. Its overall gain so far this year stands at 24.67%.