Tehran Stocks Rise 25% in Fiscal 2017-18

EghtesadOnline: Iran’s stock market had a good run in the last fiscal year (March 2017-18), as it witnessed several rallies and repeatedly extended its all-time highs.

News ID: ۷۸۲۱۹۳

08 April 2018

In most instances, stars were aligned for equities. Growing global commodity prices coincided with a devaluing national currency trend and boosted Tehran Stock Exchange and Iran Fara Bourse, more than half of which are made up of export-oriented firms.

What put the brakes on these rallies was the ever-lingering shadow of political risks.

It primarily hung over the landmark 2015 nuclear deal, otherwise known as the Joint Comprehensive Plan of Action, as US President Donald Trump repeatedly threatened to pull out of the multilateral accord. Coupled with sudden shifts in Iran’s monetary policies, stocks were in for a bumpy ride, according to Financial Tribune.

Still, TSE and IFB ended the year with solid gains, even though they couldn’t match those made in foreign exchange and gold markets.

TSE’s main index TEDPIX scored 19,060 points or 24.7% during the year to close at 96.290.

The over-the-counter IFB’s benchmark index IFX gathered 222 points or 25% last year to stand at 1,097.

Year in Review

Things were fast and furious in the first quarter (March 21-June 21, 2017), as investors kickstarted trading after having come out of a long-lasting price correction. Spirits were high, general meetings had just been held and fresh money poured into the market.

The trend continued on to the second month of the year, Ordibehesht (April 21-May 21, 2017), mostly on the back of optimism over the upcoming presidential election. TEDPIX shot up to its six-month high of 81,000 when President Hassan Rouhani was reelected on May 20. IFX hit an all-time high of 927.

Contrary to expectations, stocks stuttered post-election due to weak market fundamentals, retreating global prices and the threat of fresh US sanctions against Iran. They lost about 2,000 points during the third month and remained in a rut until the Q1 close.

Come Q2 (June 22-Sept. 22), prices were down to attractive levels with quarterly reports showing improved profitability, especially for base metals that followed the trend of rising global prices.

Momentum gathered during the sixth month of the year, Shahrivar (Aug. 23-Sept. 22), to boost TEDPIX 4.2% and record the year’s second significant rally. One of the growth’s primary factors was the Central Bank of Iran’s Sept. 2 directive to cut banks’ annual and fixed interest rates to 15% and 10% respectively.

Although CBI struggled with lenders to enforce full compliance, the move brightened up forecasts for the rest of the year.

Investors took jittery steps into Q3, as the US deadline for certifying the nuclear deal to Congress was close. Stocks bled for three weeks straight before Oct. 14, when Trump refused to certify the deal and kicked the ball into the Congress court.

With no more immediate systematic risks in sight, TSE stocks rebounded and closed the seventh month of the year, Mehr (Sept. 23-Oct. 22), at a 45-month high of 86,700.

Stocks were supercharged during the quarter’s next two months, as TEDPIX jumped 2.7% and 7.6% respectively to break past its all-time high record of 89,500. IFX, for its part, zoomed past its previous records.

Analysts attributed the accelerating growth to the eventual positive impact of CBI’s shift in monetary policy, alongside speedy currency devaluation and hike in steel, iron ore and methanol prices.

The markets started Q4 with a bang as TEDPIX gained 3.46% during the 10th month, Dey (Dec. 22-Jan. 20). The rally, however, did not persist, as JCPOA again came under threat and new market regulations made investors wary.

But what really put the cap on equities was an unexpected freefall in rial’s value against the US dollar in mid-January. Sudden fluctuations caught nearly everyone off-guard, prompting a slowdown in trade that lasted until the year’s dying days.

The lethargy was reinforced by CBI’s FX market intervention in February, which included issuing certificates of deposit that fetched 20% interest, 5% higher than what banks offered. The CDs sapped USD’s rally for only a short time and eventually spawned government bonds with more than 20% yield in competition.

Stocks, naturally, ended up as the less attractive investment option and the market was further battered in March, as institutional investors went on a selling spree to close their books.

Forex, Gold Coin Rule Markets in Annual Gain

Equities were no match for FX and gold in terms of gains last year. USD, euro and gold coin’s rallies defied regulators’ interventions and continued to climb to new highs, trumping other markets in their wake.

Euro was on top in terms of gains last year, followed by Bahar Azadi gold coin and USD, according to Tehran Gold and Jewelry Union’s data. With 24.7% and 25%, TEDPIX and IFX were next respectively.

The rial was quoted at 58,360 against euro by the year’s close and marked a 41.92% growth for the European currency for the year. Rial had dropped to an all-time low of 61,820 against the currency just a month before the yearend.

Rial was also down 30.7% against USD to 48,990, in what was rial’s lowest against the greenback for the year.

As for gold, Bahar Azadi gold coin gained 34% to 15.7 million rials. This was the coin’s highest historical level.

Fiscal Year’s Trade in Detail

Over 262.9 billion shares valued at $12.86 billion were traded on TSE last year. The number of traded shares and trade value inched up 2% and 1% respectively compared to the year before.

TSE’s First Market Index gained 13,664 points or 25.1% to end at 68,124.3. The Second Market Index also grew by 40,116 points or 24.1% to close at 206,487.

And at IFB, over 90.16 billion securities valued at $11.9 billion were traded, with the number of traded shares and trade value rising by 12% and 29% year-on-year.

IFB’s market cap gained $8.46 billion or 40% to reach $29.4 billion.

Its First Market witnessed the trading of 11.02 billion securities valued at $442.2 million, indicating a 25% and 33% drop in the number of traded securities and trade value respectively.

About 34.15 billion securities valued at $1.83 billion were traded in the Second Market, with the number of traded securities growing by 32% and trade value dropping by 4% YOY.

Over 388 million debt securities valued at $7.46 billion were also traded at IFB, growing by 44% in both number of bonds traded and their value.

Exchange-traded funds also grew 48% in trade number and 51% in value to reach 2.27 billion worth $478.3 million.

Housing mortgage rights’ trade was up, as it reached 17 million securities worth $256 million, marking a rise of 37% and 24% respectively.