The National Development Fund of Iran, the sovereign wealth fund, will deposit an extra 5 trillion rials ($15.7 million) with the Capital Market Stabilization of Fund (CMSF) to help lift the struggling stock market.
“Following talks with NDFI officials, the money is to be paid on Sunday,” IBENA quoted Amir Mahdi Saba’ie, managing director of the stabilization fund, as saying.
Based on an agreement with the NDFI, Saba’ie said 70 trillion rials ($225 million) is to be injected into the bourse via the CMSF.
“This will [help] augment the CMSF’s clout to stabilize the bourse,” he said, noting that the fund will infuse “liquidity into the market if and when it deems necessary”.
The measure comes after Security and Exchange Organization’s recent call on the government to extend its support for the capital market suffering from an extended slump.
In a letter to the First Vice President Mohammad Mokhber, Majid Eshqi, the SEO head, listed eight major challenges the stock market is grappling with and called on the NDFI to pay the remaining tranche of the agreed resources to the CMSF.
In a letter to the First Vice President Mohammad Mokhber, Majid Eshqi, the SEO head, listed eight major challenges the stock market is grappling with and called on the NDFI to pay the remaining tranche of the agreed resources to the CMSF
The payment is in line with a support plan announced last year. In late 2021, the government officially allowed the NDFI to inject $200 million in the CMSF. At the time, only 10 trillion rials ($40m at the then exchange rate) were 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 support the long-struggling market and help safeguard the interest of investors.
As per CMSF articles of association, the stabilization fund is fed via three main financial 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, but the maturity date can be extended. The CMSF is responsible for paying the principal amount plus interest.
Independent of the government, the NDFI was founded to save a portion of forex earnings from oil and gas for future generations. Like all wealth funds, it lends to public and private firms in need.
