Tehran Stock Exchange Market Cap at Three-Year High

EghtesadOnline: Total market capitalization of Tehran Stock Exchange reached 11,200 trillion rials ($95 billion) by the end of seventh fiscal month to October 22, the highest since the beginning of fiscal 2016-17.

News ID: ۷۸۵۰۴۹

23 November 2019

The figure indicates a whopping 87% growth compared to the beginning of the current fiscal year in March 2019, according to a report published on Securities and Exchange News Agency website.

The growth, however, is way lower than the 149% reported for the first seven months of fiscal 2013-14.

Market cap is the market value of a publicly traded company's outstanding shares. It is calculated by multiplying the number of shares outstanding by the current market price of one share, Financial Tribune reported.

The TSE ended the month to Oct.22 in positive territory for the eighth consecutive trading month. The growth, however, was subtle at 1.8%, boding ill for investors worried that the market may enter a new phase of stagnation in the near future.

The TSE’s benchmark, TEDPIX, rose 122,435 points since the beginning of the current fiscal year (March 20) to stand at 304,996 as of November 20,up 70%.

Market Outlook

Unlike the first half of the fiscal year, the market is expected to be volatile in the second half with observers increasingly of the opinion that the era of consecutive rallies is coming to an end.

SENA forecast more volatility for the stock market in the coming months as bubbles in small equity prices will deflate and investors will be more inclined to sell amid the specter of bleaker market outlook.

Witnessing price falls, the investors, who made substantial profits during the long bullish market, may rush to sell shares to save gains. This could exacerbate market fluctuations in the coming days.

The increasing number of natural entity investors in the stock market is also expected to add to the problem. Encouraged and emboldened by the upbeat performance of stock market in the past months, a deluge of investors forayed into the capital market, giving rise to the unprofessional market behavior.

Based on data released by the Central Securities Depository of Iran, there were 11.1 million active trading codes in the capital market by the end of first half of the current year on September 22.

Close to 400,000 trading codes were issued for newcomers in the seven-month period since the beginning of the current calendar year (March 20).

As announced by the TSE boss, Ali Sahraee, novice investors injected more than 30 trillion rials ($260 million) into the stock market during the period.

Perturbed by stagnation in parallel markets, namely currency, gold, housing and auto sectors, novice investors put large amount of liquidities into stocks.

They invested mainly in the initial public offering given the IPO potential to offer higher returns in a short period without imposing risks.

The number of initial public offering on TSE and the over-the-counter equity market Iran Fara Bourse has grown three times in seven months on a year-on-year basis, according to a report by the Tehran Chamber of Commerce, Industries, Mines and

Agriculture Economic Review Department

Since the beginning of the fiscal year, both markets have hosted more than 16 IPOs. IPOs made 3.4% contribution to the funding.

Emboldened by the remarkable and riskless gains from investment in IPOs, many of the newcomers were motivated to increase their capital and purchase higher volumes of shares.

Bleaker market outlook, investment in valueless shares, lack of financial literacy along with expectations of higher returns in the short-term are seen as factors that may push novice investors out of the market in the coming days and by extension lead to a huge market outflow.