Shares can be used as collateral in banks and credit institutions to receive loans, said the head of Central Securities Depository of Iran.
“The facility was previously offered only to shareholders of the so-called Justice Shares, but now it has been extended to all shareholders,” Hossein Fahimi was quoted as saying by Securities and Exchange News Agency.
"All banks and credit institutions will be able to use the electronic platform provided by CSDI to use shares as collateral for lending to shareholders."
The official noted that shareholders could also be given credit cards with a fraction of the value of their shares. He didn’t elaborate.
The move is aimed at preventing the oversupply of shares in the stock market and helping shareholders in need of liquidity to postpone the sale of shares.
"Instead of selling shares, stockholders will be able to use loans and credit cards offered by banks and have a longer period of time to manage their portfolios," Fahimi said.
The plan comes on the heels of a steep downturn in the stock market. On the back of fresh liquidity from neophyte investors, the main index of Tehran Stock Exchange, TEDPIX, crossed an all-time high of 2.1 million points on August 9 – an unprecedented 300% growth since the beginning of the fiscal year in March 2020, when the benchmark was near 500,000 points. TEDPIX has now crashed to reach 1.2 million points, down 43% from the historic levels.
In a similar measure, banks have already launched a plan to issue credit cards for owners of Justice Shares to encourage shareholders to keep their shares and discourage them from rushing to sell, accepting their shares as collateral.
Accordingly, the shares are used as collateral and the amount of credit will be 60% of the share portfolio.
Trade in Justice Shares started officially on May 26, with shareholders allowed to place sale orders for 30% of the value in their portfolio in the initial stage.
Later, the stock market regulator allowed shareholders to sell 60% of their share value. The decision reportedly led to an oversupply in the share market and added to the slump in share prices.
Justice Share portfolio includes 49 state-owned companies in the auto, metal, mining, agriculture, petrochemical and banking sectors.
Some analysts blame the excessive supply of Justice Shares for the bearish trend of the once lucrative stock market, which started in mid-August and has not yet got back on its feet.
