Selloff Dominates Trading as TSE Slips Further

Selloff Dominates Trading as TSE Slips Further Selloff Dominates Trading as TSE Slips Further

Tehran Stock Exchange's main index (TEDPIX) tumbled once again on Sunday as shaky investors sold off shares and lost more, while eyeing the upbeat news on the national economy.

TEDPIX slipped 157 points or 0.22 percent to 71,665.4, notching another loss, weighed down by a variety of factors including investors' cautious approach as well as the persistent economic uncertainty.

Downtrend is likely to reign over the equity market for a while as the main indices continue their negative sentiment. On Sunday, first market index gave up 106 points or 0.2 percent to 52,707.8. Second market index dipped 367 points or 0.26 percent to 141,530. Free floating index slumped 198.6 points or 0.25 percent to 80,702. Industry index lost 119.1 points or 0.2 percent to 60.691, and blue chip index was off 3.8 points or 0.11 percent to close at 3,305.8.

Compared to Saturday, total volume of shares traded in TSE briefly ticked lower: close to 312 million shares changed hands, valued at 839 billion rials.

The equity market began Sunday on uncertain footing. Investors are worried that the government's measures to curb the inflation and stimulate the economic growth wouldn't shift the market's negative trend anytime soon.

The selloff has recently gained speed in the equity market as many investors feel unsettled about losing more money if the shares continue to lose value.

Despite knock-on effects from the recent positive news -- 0.5 economic growth for the first quarter of this year (March 21-June 22), the equity market continues to go down the decline path. 

Referring to reports of growth, President Rouhani's chief of staff Mohammad Nahavandian said Saturday that the economy is on the right track.

If anything is going to spook investors, it will likely be the mounting concerns over the nuclear negotiations between Iran and the P5+1, market analysts believe.

Iran and the P5+1 group of major world powers extended negotiations to reach a final comprehensive nuclear agreement, before the deadline arrives on November 24.

A quick look at the overall performance of the equity market indicates that listed companies, including the leading industries, are grappling with severe financial problems. Due to the current recession and a shortage of financial resources, Iranian banks are incapable of providing funds to the businesses, which would inevitably stop the economic recovery from taking hold.

According to economy minister, Ali Tayebnia, around 70 percent of businesses in the industrial sector are struggling financially and are unable to obtain loans. The previous government’s policy of granting low-interest bank loans to small businesses has led to a huge rise in defaults, resulting in a banking crisis. Many banks are now reluctant to lend to businesses listed in the industrial sector. 

Foreign investment is really in demand; however, considering the US-led sanctions, this remedy may not apply to the domestic industries at least for the time being.

The national economy may have turned back to the path of growth, but still there is a lot to be covered to shape a robust recovery.

The government's economic policy has triggered a stable currency market and has even bolstered the rial. This move has had a positive effect on the economy, but has, at the same time, affected the exports.

Iran's economy has its own complications. Analysts believe the recovery process won't go smoothly unless sanctions are lifted.

On this financial roller-coaster ride, all want to experience the ups without the downs. But while the market has huge obstacles on its way to flourish, it would not experience a straight positive trend.

Best Time to Shore up Portfolios

Stocks have hit their floor price and so has emerged the best occasion to shore up portfolios. Individual investors are selling off their shares, while mutual funds have initiated hunting for and gathering shares as they realized the best time to invest.

The latest quarterly survey suggests the outlook for the economy is pretty positive with growth in output.  

In a down market, many investors may feel uneasy. Yet, a small group of investors and brokers read the situation differently. They come to the TSE or their offices with wallets open.

Past performance is not a guide to future performance, because no one can predict a long-term trend in any market. However, precautionary measures are crucial for any type of investment in the market. Iran's economy is not experiencing stability now, but the stock market has the capacity to attract attention given its relatively large and liquid size, and, thus, could be an interesting part of a frontier fund.