In a letter to the First Vice President Mohammad Mokhber, the head of the Security and Exchange Organization (SEO) listed eight major challenges the stock market is grappling with.
According to Eghtesadnews, the increasing trend in bank interest rates, the negative impact on listed companies’ profit margins due to the growth in feedstock and energy prices, mandatory sale prices on companies and the apparently unending chaos/fluctuations in gold and currency rates are the capital market’s main problems Majid Eshqi said in the letter.
Holding the Iranian National Oil Refining and Distribution Company's trade at the Energy Exchange, divesting shares of major auto companies, implementation of measures regarding export companies without considering national interest plus cutting industries’ access to the power grid during summers are other factors hurting the market.
The letter offered some proposals to help address the challenges, including measures to stabilize rates in the interbank market based on previously approved caps, removing European hub rates in pricing feedstock and energy carriers and the government's controversial pricing policies for listed companies.
The SEO chief urged the government to announce effective measures to improve the transparency of financial relations between the government and businesses and finalize its stance on divesting the shares of automakers.
Stabilization Fund
The official called on the National Development Fund of Iran, the sovereign fund, to pay the remaining tranche of agreed resources to the Capital Market Stabilization of Fund (CMSF).
Based on a previous agreement with the NDFI, 70 trillion rials ($225 million) is to be injected to prop up the struggling bourse by the CMSF. The NDFI reportedly injected 40% of the amount this year.
In late 2021, the government agreed that the NDFI inject $200 million into the CMSF. At the time, only 10 trillion rials ($40m at the then exchange rate) was deposited and the rest was supposed to be paid in phases.
The CMSF was created in 2017 to help address the credit crunch in the bourse. It has a mandate to use workable measures to support the share market and safeguard the interest of investors.
As per CMSF articles of association, the stabilization fund is fed via three main sources, namely direct government investment, NDFI investment and income from trading fees charged by the Tehran Stock Exchange and the junior exchange Iran Fara Bourse. As per rules, 30% of the income from stock trade fees is deposited with the CMSF.
Rules also stipulate that the NDFI invest 1% of its resources in the CMSF. The money is a loan at 12% to be repaid in five years and the maturity can be extended.
In the March 2022-23 budget, the stabilization fund is expected to receive 300 trillion rials ($967 million) from different sources.
As per new support measures announced by the government, all income from tax on share trade will be injected into the CMSF this year.
Fourth Monthly Decline
Published reports indicate that the downward trend in the stock exchange is here to stay.
The main index of Tehran Stock Exchange, TEDPIX, shed more than 69,250 points during the month to Sept. 22 and plunged 4.86% to settle at 1,355,000 points last month.
With the recession expected to linger in the foreseeable future, the TEDPIX logged a fourth monthly loss after registering a 3.22% decline the month before.
Under the bullish run, the TSE’s main index gained more than 14% in the first two months of the year starting in late March before returning to the bear market.
In the month, the TSE’s equal weighted index lost 0.41%. Unlike the market cap-weighted index, the equal-weighted index better reflects the performance of companies with small market caps.
The latter index, however, eked out more gains in the first four months of the current fiscal year compared to TEDPIX.
Close to 114.46 billion shares changed hands during the last fiscal month worth 919.14 trillion rials ($2.9 billion). Compared to the month before, the volume of shares traded at the TSE indicated a 23.9% plunge, while the total trade rose 3.39%.
