Tehran Stock Market in Hibernation

EghtesadOnline: Bears are dominating the equity market in the dying days of winter.

News ID: ۷۸۲۰۰۲

13 March 2018

One could argue that it’s always like this, as the fiscal year draws to a close, but this year has been more intense.

For one thing, the government's budget deficit urges it to flood the market with fresh debt securities. For another, semi-private entities such as banks enter the market with new block sales and vie for liquidity through rapid initial public offerings.

TSE’s main index TEDPIX shed 1,101 points or 1.1% during the week that ended on March 7 to close at 96,860.3, Financial Tribune reported.

The smaller over-the-counter exchange market Iran Fara Bourse’s benchmark index IFX gave up 12 points or 1.1% during the same week to stand at 1,808.2.

This is while the money supply has reached an unprecedented level of 15 quadrillion rials (about $333.3 billion), according to the Persian daily Donya-e-Eqtesad.

The rise in money supply comes as the banking system is unable to create actual value in the economy due to the increasing size of toxic or non-existent assets.

Political risks, mainly over the prospects of the 2015 nuclear deal signed between Iran and world powers being abandoned amid rising tensions between Iran and the US, have also fuelled uncertainty for traders coupled with volatility in the foreign exchange market.

A devaluing currency was equities’ final hope of revitalization, but the Central Bank of Iran’s recent attempts at cracking down on and regulating the FX market have given rise to a gray market that refuses to toe the line.

As a result, the US dollar is now being traded at a third rate—in addition to the official and market rates—about 3,000-4,000 rials higher than what CBI offers.

The hazy atmosphere is expected to dissipate in the upcoming year, but its new dimensions will continue to confound investors.

> Weekly Trade in Detail

Over 6.39 billion shares valued at $322.06 million were traded on TSE during last week. The number of traded shares grew by 28% while trade value dropped by 18% compared to the week before last.

Trading at Iran’s stock markets starts on Saturday and ends on Wednesday.

TSE’s First Market Index shed 863 points or 1.2% to end at 68,709. The Second Market Index also dropped by 1,992 points or 0.9% to close at 206,756.6.

And at IFB, over 2.52 billion securities valued at $540.6 million were traded, with the number of traded shares and trade value rising by 83% and 193% compared to the previous week.

IFB’s market cap lost $83.57 million or 0.3% to reach $30.83 billion.

Its First Market witnessed the trading of 154 million securities valued at $7.13 million, indicating a 3% and 11% rise in the number of traded securities and trade value respectively.

About 1.07 billion securities valued at $46.28 million were traded in the Second Market, with the number of traded securities and trade value surging by 181% and 117% respectively week-on-week.

Over 21 million debt securities valued at $435.5 million were also traded at IFB, skyrocketing by 247% and 267% in the number of bonds traded and their value respectively.

Exchange-traded funds also rose 151% in trade number and 63% in value to reach 149 million worth $23.28 million.

Housing mortgage rights’ trade was down, as it reached 36,000 securities worth $5.3 million, marking a drop of 16% and 17% respectively.

> Dollar, Euro Back in the Game

Equities were already on the backseat when it comes to market gains, but things intensify last week.

Gold, the US dollar and euro all notched significant gains to reverse the week before last’s dominant downtrend.

The US dollar came on top in terms of weekly gains, followed by euro, Bahar Azadi gold coin, TEDPIX and IFX.

Euro still tops the charts in terms of gains made  so far this fiscal year (March 21, 2017-18), followed by Bahar Azadi gold coin, the US dollar, TEDPIX and IFX.

The rial was quoted at 56,190 against euro by Thursday’s close, according to Tehran Gold and Jewelry Union’s data. It marked a 3.11% rise for the European currency.

Euro’s gains so far this year reached 36.64%, having started the year at 41,120.

TSE and IFB posted a 25% and 23.4% gains so far this year respectively.

The US dollar gained slightly over 7% against the rial last week to 47,860. The dollar’s gain so far this year has reached 27.69%, having started the year at 37,480.

As for gold, Bahar Azadi gold coin gained 2.03% last week to 15.51 million rials. Its gain so far this year stands at 32.45%.