Iran’s share market is booming on the back of huge inflow of fresh money and a substantial increase in investors in the past three months.
The managing director of Securities and Exchange Organization Hassan Qalibaf-Asl told a press conference Monday that 500 trillion rials ($2.5 billion) in fresh capital flowed into stocks during the first quarter of the current fiscal year that started in late March.
This figure is staggering compared to the money inflow throughout the last fiscal year that reached 300 trillion rials ($1.5 billion), Qalibaf-Asl was quoted as saying by ISNA.
Analysts say the regular influx of money can be explained by the remarkable increase in the number of people entering the market.
Qalibaf-Asl said 1.6 million new trading codes have been issued since the beginning of the current year compared with 820,000 issued last year.
This has also pushed up the value of trade in the bourse. The value was 8,800 trillion rials ($45 billion) in the first Iranian quarter -- up over 8,300 trillion rials last year.
Bigger Space
Qalibaf-Asl said growing traction of the stock market has opened a wider space for the government and listed companies to raise funds.
“Liquidity offers an opportunity for companies to raise funds,” Qalibaf-Asl said, adding that “the government can also seize the exceptional opportunity to get funds.”
He revealed that the share market made available 1,000 trillion rials ($5.2 billion) in funds for private and public firms since the beginning of the current fiscal year.
The figure was 2,600 trillion rials in the last fiscal year and 1,200 trillion rials in March 2018-19. This indicates that businesses are gradually approaching the stock market for funds. That said, it seems that companies are still highly reliant on banks for funds.
In recent months banks have come under increasing criticism for their unwillingness and inability to lend to businesses struggling with operational costs largely due to inflation and deteriorating economic conditions.
The stock market is thriving and its indicators are rising at tremendous speed due to a variety of factors, namely the government’s support and investors’ growing interest in stocks and shares seen as safe havens.
The benchmark of Tehran Stock Exchange has grown exponentially since April with the TEDPIX, rising from around 500,000 points to 1,341,000 points on Monday, to put the index growth above 150% in three months.
With inflation galloping investors see the stock exchange as the safest place to hedge the value of their assets, especially when investment in parallel markets (currency, gold, auto) are discouraged by the government saddled deficit spending and huge revenue loss.
The government is also striving to redirect part of the rampant liquidity into stocks and shares to curb its flow into parallel markets and avoid price shocks, especially in forex rates. The viability of this option, however, has come under a big question mark as almost all financial markets are now grappling with unprecedented volatility.
In addition, observers concur that the government needs a robust share market to divest its shares in bloated state-run companies and reduce its footprint in the economy.
For this purpose it has pledged to shore up and expand the stock market by listing more companies and encourage investors to put money where the mouth is.
