The Securities and Exchange Organization of Iran, the regulatory body of the capital market, on Saturday announced new measures to help prop up the stock market following successive declines in the main indexes last week.
According to SENA, the SEO-affiliated news agency, the organizations board of director approved injecting 5 trillion rials ($9.6 million) to the Capital Market Stabilization Fund.
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 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, National Development Fund of Iran 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.
In the March 2022-23 budget, the stabilization fund was expected to receive 300 trillion rials ($967 million) from various sources.
As per the new support measures announced by the government, all income from tax on share trade will be injected into the CMSF this year. According to budget forecasts, the government expects to earn 104.2 trillion rials ($336 million) from share trade.
The SEO also extended the portfolio correction period for fixed-income funds from three to five months.
In a week marked by intense market turbulence, the Tehran Stock Exchange experienced a historic decline.
The Tehran Stock Exchange main index, TEDPIX, lost 236,960 points or 9.42% during the week to end at 2,277,713. Trading at TSE starts on Saturday and ends Wednesday.
About 110 billion shares worth 871 trillion rials ($371 million) changed hands at TSE during the week, down 10.9% and 11.21% respectively.
The TSE’s equal-weighted index was also down 10.65% during the week. According to Eghtesadnews, during the past week 106.3 billion rials flew out of the stock market.
Optimism
Ali Ahmadzadeh Asl, CEO of Ehtemam Iran Investment Company, discussed the impact of recent decisions by the SEO in an interview with SENA. According to Ahmadzadeh Asl, all decisions, including the deposit of 5 trillion rials into the Stabilization Fund and extending the portfolio correction period for fixed-income funds are considered significant to help lift the sagging market.
He said the capital market in Iran is more often than not impacted by nervous investors and the pattern of events in other key markets.
"The injection of funds into the Stabilization Fund can facilitate the entry of new liquidity into the market and market officials should do more to restore shareholders' trust."
"Recent decisions by the organization come at an opportune time provided that the regulatory authority also shows the necessary commitment to implement these measures."
Ahmadzadeh Asl emphasized that the regulatory authority should prevent share projectization, unconventional trade and other harmful moves that undermine market sentiment.
