The managing director of Securities and Exchange Organization said the government appraises the resiliency of the stock market when selling new bonds.
Majid Eshaqi said this in response to concerns of stock market investors who say that the government bond sales have indeed drained liquidity out of the bourse, IRIB news said.
Main buyers of the bonds are banks and investment funds and rarely retail investors, Eshaqi said.
“Banks and financial institutions have been obliged to allocate a part of their funds to bonds and their ability to do so is assessed beforehand.”
According to Eshqi, the same considerations exist for listed companies and the regulator delays IPOs, if and when necessary, until the stock market recovers from a bearish trend. Several companies are awaiting SEO approval to hold IPOs, he said.
The CBI cancelled a bond auction in early November apparently over concern about its impact on the struggling stock market. In an announcement it said it would hold the auction on Tuesday (today) and offer 100 trillion rials ($357 million) in bonds.
With the share in decline and capital flowing out, retail investors have been complaining that mutual funds are coerced to invest in government bonds instead of using their resources to boost the share market that is in disarray since the summer of last year.
The government generated 440 trillion rials ($1.5 billion) in bonds from May to September to plug its deepening deficit holes. Data has it that stock market investors, particularly investment funds, have made a bigger contribution to the bond sale.
Reports say 295 trillion rials ($1b) worth of bonds have been purchased by investors in the stock market and the rest by banks and credit institutions.
