The council is an ad hoc body comprising heads of three branches of power mandated to make critical economic decisions.
It met on Monday to discuss seven measures proposed by the Securities and Exchange Organization, the stock market regulator. The remaining three measures don’t need the council’s approval and were put it put into force last week.
Speaking on the sidelines of the meeting, the SEO chief, Mohammad Ali Dehqan-Dehnavi said the council approved the seven decisions after trivial changes, IRNA reported.
Accordingly, 80% of government revenue from tax on stock trade in the present fiscal year (March 2021-22) will be deposited with the Capital Market Stabilization Fund, a fund designed to help resolve the credit crunch in the bourse.
The council allowed the CMSF to issue bonds worth 200 trillion rials to try and quench the stock market’s thirst for liquidity. Reimbursing bonds will be guaranteed by the government.
As for support from banks, the council allowed banks and credit institutions to directly invest in the bourse. To do so they are exempted from penalties envisioned in the Law for Removing Obstacles to Competitive Production and Promoting the Financial System, according to Dehqan-Dehnavi.
As per the Articles 16 and Articles 17 of the law, lenders are obliged to cede shares they own in companies engaged in non-banking activities or face tax liability.
Another decision was granting tax exemptions to listed companies that recapitalize using their profits. The regulator was also allowed to offer tax deferral to listed companies that buy their own issued stocks and of their subsidiaries. “They can delay tax payment up to 50% of the purchased shares for one year.”
One important measure was allowing the National Development Fund of Iran, the sovereign wealth fund, to directly invest in the share market.
As per NDFI articles of associations, it can invest in overseas financial markets. Following Monday’s meeting, the NDFI can broaden its investment scope and invest in the domestic stock market as well.
The SEO is also allowed to compensate losses of those who bought units of two government-owned exchange-traded funds. Compensation includes giving government-owned stocks in lieu for investors of ETF losses.
The government last year offered its shares in three banks, two major insurance companies and four refineries via two ETFs. Apart from regular stock market investors, the government invited the public to buy the ETF units. When the bourse bubble burst last summer, ETF prices plunged 30%.
Besides the new supportive moves, Dehqan-Dehnavi pointed to a proposal by Majlis based on which the government will end intervention in pricing products of listed companies -- a long-awaited demand by stock market investors and manufacturing companies listed at the stock market.
The government’s practice to set a ceiling and floor price for a range of products, namely steel, mineral, auto, cement and dairy products has impacted the profit of the companies that produce such goods, which then undermines their performance in the bourse.
“The latest proposal has to be initially reviewed by the commission within the council and later in the next meeting of the council,” Dehqan-Dehnavi said.
Tehran stock market is grappling with a bearish trend that began after the price bubbles burst last August and non-stop selloff pressure has continued unabated.