President Hassan Rouhani on Wednesday reiterated the need to continue supporting the share market by boosting the supply side and listing more companies.
Speaking at a weekly Cabinet meeting, Rouhani said all relevant administrative bodies have a duty to protect the people’s assets invested in stocks.
Referring to the pattern of growth in the share market in recent months, he underscored the need to increase initial public offerings to address the supply crunch.
“We need to increase IPOs to let the bourse safely continue its ascending order,” IRNA quoted him as saying.
On his government’s meeting with the Securities and Exchange Organization on Tuesday, he said the SEO will increase floating stocks of listed companies to boost share offers.
Floating stocks represent the total number of shares that are open to the public. It is a measure that excludes closely-held shares. Closely-held shares are stock shares that are held by company insiders or controlling investors. In short, floating shares indicate the number of shares available for trading.
During the meeting with SEO officials, Rouhani pointed to the astronomical growth in stock market indicators, calling on regulators to ease procedures for listing companies to accommodate the growing demand in shares.
Such measures are in line with efforts to address growing concern from many quarters to restrain the unreasonable liquidity. Some market observers have been quoted as saying that the unprecedented rise in share prices “is incompatible with economic fundamentals.”
The government’s unreserved support for the market has caused stocks to grow exponentially since the beginning of current fiscal year (in March).
The benchmark of Tehran Stock Exchange has soared more than 220% in three and a half months and nearly 2 million new investors have joined the market, mainly novices with little or no knowledge of how the markets functions.
Justice Shares
Rouhani on Wednesday announced a timeframe to fully remove restrictions on trading the so-called Justice Shares before two religious and national occasions.
Justice Shares are shares of big government-owned companies that were given free to the six lowest income deciles a decade ago. More than 49 million Iranians own these shares.
Late in April, the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei approved a government request to transfer the ownership of shares to the people and remove restrictions on its trade in the bourse.
The shares were initially not tradable and shareholders received a small amount of dividends in the last two years.
Shareholders are now allowed to trade 30% of shares in their Justice Share portfolio. Based on the announced timeframe, investors will be able to trade 30% of shares by August 8, marking Eid al-Ghadeer, the most important religious festival of Shiites, and another 30% by 22 Bahaman (Feb 11), marking the anniversary of the 1979 Islamic Revolution.
Observers say removing restrictions on trading Justice Share helped strengthen the stock market and avoid further fluctuations in macroeconomic variables by absorbing rampant liquidity while letting the government secure funds for its budgetary needs.
The Justice Share portfolio includes 49 state-owned companies in the auto, metal, mining, and agriculture, petrochemical and banking sectors. A total of 35 companies are already listed with the stock market and another 14 are planning IPOs.
This share scheme goes back to 2007, when former president Mahmoud Ahmadinejad embarked on speeding up the privatization of government firms by offering shares to low-income families.
