Positive signals such as rising money supply in the stocks market and constructive developments in the foreign exchange market were still there, but risks such as sanctions threatening Iranian oil exports as well as concerns regarding the government's economic team sapped the rally's strength.
Tehran Stock Exchange's all-share index, TEDPIX, gained 2,451.9 points or 2.25% during the week that ended on June 27 to close at 111,324.8. This brings the benchmark's return since the beginning of the year (March 21) to 15.6%.
Iran Fara Bourse’s benchmark index, IFX, added 27.9 points or 2% to stand at 1,269.5. The index's return since March 21 reaches up to 16%, Financial Tribune reported.
> Gov't Recognizes "Secondary" FX Market
Starting with positive news, the government finally decided to recognize a "secondary" foreign exchange market where the US dollar can be traded at a rate other than the official unified rate of 42,000 rials.
As per the measure, exporters that do not have to register their currency earnings in the online Integrated Forex Deals System (locally known as Nima) can sell their hard currency to importers of "non-essential" goods at "negotiated" exchange rates.
This is great news for businesses, as the new rates are expected to be closer to the unofficial market rate after two months of struggling with an enforced unified one.
The measure cooled forex and gold coin market bulls. On Wednesday, the rial continued to gain against the dollar with each USD being unofficially traded at 78,000 rials, down from a high of 90,000 rials on Monday.
The gold coin also shed a part of its gains, after an unprecedented rally broke several historical records. The benchmark Bahar Azadi ended the week at 28.5 million rials, while it had touched an all-time high of 30 million rials on Sunday.
Bahar Azadi's weekly gain was significant, nonetheless. It gained 18% overall and was up about 82% since the beginning of the fiscal year (March 21, 2018).
Fresh money also continued to warm up stocks trading as non-block daily trading reached up to $219 million, highlighting equities' growing attraction for investors.
> Shakeup in Rouhani's Economic Team
In an open letter on Wednesday, 187 members of the parliament asked President Hassan Rouhani to make changes to his Cabinet, while indirectly threatening to use "predetermined legal measures" if Rouhani fails to do so.
Local media reports pointed to Governor of the Central Bank of Iran Valiollah Seif, Minister of Roads and Urban Development Abbas Akhoundi, Economy Minister Masoud Karbasian and Minister of Industries, Mining and Trade Mohammad Shariatmadari as the MPs' likely targets to be held accountable for the recent economic woes, including surging rial devaluation, spiking real-estate prices, runaway consumer goods prices and a series of import scandals.
The president's chief of staff did not rule out the names in a statement later in the day.
"I cannot confirm the names; may be some of them, maybe not," Mahmoud Vaezi told Khabar Online. "Besides, making Changes to the Cabinet members is not yet certain."
Media reports are already pointing to the potential replacement candidates. Rumors have it that Karbasian could hand his seat over to Ali Divandari, the head of Monetary and Banking Research Institute, as the Persian daily Etemad says CBI Governor Valliolah Seif is expected to be replaced by former economy minister, Ali Tayyebnia.
It's still too early to tell if the Cabinet reshuffle can positively impact the markets. The recent FX policy certainly points to a changing direction, but the shakeup can also be a breeding ground for ambiguities at least in the short run. If Wednesday trade is any indication, equities did not take in the news favorably.
> Oil Factor
Now let's get to the downright bad news. The US administration expects all countries to reduce their Iranian oil imports to zero from early November or face US sanctions, a senior US State Department official said on Tuesday.
No exception will be made for countries that currently buy oil from Tehran, CNN reported.
"I would be hesitant to say, 'zero waivers ever,' (but) I think the predisposition would be no, we're not granting waivers," the official briefed reporters on condition of anonymity.
Oil prices climbed more than 3.5% in New York as traders digested the prospect of a larger than expected loss of Iranian supply this winter. US benchmark West Texas Intermediate surged to $70.50 a barrel, while Brent, the European crude benchmark, climbed to $76.50 a barrel, Bloomberg reported.
Curbing Iranian oil exports is part of Washington's decision in May to quit the 2015 Iran nuclear deal. Formally known as the Joint Comprehensive Plan of Action, the deal lifted sanctions on Iran in exchange for the Islamic Republic to limit the scope of its nuclear program.
Some have refused to heed the US call, however. India's petroleum ministry, for instance, said on Wednesday that it did not recognize unilateral sanctions but only those by the United Nations.
Iran is India's third-largest oil supplier after Iraq and Saudi Arabia, according to Indian government data. And India buys more Iranian oil than any country, except China.
China also looks likely to defy US calls to halt imports. Foreign Ministry's Lu Kang told reporters on Wednesday that Iran and China "maintain normal exchanges and cooperation on the basis of conforming to international law ... This is beyond reproach."
> Weekly Trade in Detail
Over 14.02 billion shares valued at $795.3 million were traded on TSE last week. The number of traded shares and trade value surged by 152% and 150% compared to the week before last.
TSE’s First Market Index gained 2,048.5 points or 2.57% to end at 81,654.5. The Second Market Index rose by 3,605 points or 1.64% to close at 223,360.
At IFB, over 4.08 billion securities valued at $339.1 million were traded, with the number of traded shares and trade value rising by 50% and 14% compared to the previous week respectively.
IFB’s market capitalization also gained $236 million or 1% to reach $38.91 billion. The cap has grown by 11% since the year began.
Its First Market witnessed the trading of 678 million securities valued at $37.47 million, rising 96% and 155% respectively.
About 2.2 billion securities valued at $125.8 million were traded in the Second Market, with the number of traded shares and trade value jumping 53% and 65% respectively.
Over 5 million debt securities valued at $109.8 million were also traded at IFB.
Exchange-traded funds trade reached 83 million worth $24.3 million.
Housing mortgage rights’ trade also reached 500,000 securities worth $8.78 million.