SEO Denies Mutual Funds Pouring Into Gov’t Bonds

EghtesadOnline: Head of Supervision Department of Securities and Exchange Organization denied reports that investment funds are pouring resources into government bonds.

News ID: ۷۸۷۲۴۲

01 November 2021

In a talk with state TV, Meisam Fadaee addressed ongoing concerns of millions of retail investors that the mutual funds have been coerced to invest in government bonds instead of reviving the share market that has long fallen on hard times.

Resorting to numbers, he said fixed income funds have added stocks worth 116 trillion rials ($430 million) to their portfolios during the bearish market trend.

According to Fadaee, buying of shares by mutual funds involved in market making operation outperformed selling in the past seven months.

“At present, market making funds hold assets worth 1,000 trillion rials ($3.7 billion) used mainly to improve liquidity of shares,” he was quoted as saying by Securities and Exchange News Agency,

Total purchase of stocks by market makers was worth 420 trillion rials ($1.5b) and their share sale amounted to 280 trillion rials ($1b) in seven months.

Market makers essentially act as wholesalers buying and selling securities to balance the market and help keep the market functioning. Market making gained traction after Iran's equity market took a drubbing under a prolonged sell-off last summer.

The official concurred that the government has embarked on selling bonds but rejected oft-mentioned claims that this had contributed to the steep decline in the bourse.

The government generated 440 trillion rials ($1.6 billion) from bond sale from May to September to plug its budget deficit holes. Data indicate that stock market investors, particularly investment funds, made a bigger contribution to the bond sale.

Of the abovementioned amount, 295 trillion rials ($1b) in debt  was bought by retail and institutional investors in the stock market and the rest by banks and credit institutions.