Business And Markets

Stocks Extend Saturday’s Plunge

Stocks Extend Saturday’s PlungeStocks Extend Saturday’s Plunge

Shares carried on with their downward momentum and fell for the second day this week on Sunday, though losses were less than Saturday.

Tehran Stock Exchange’s all-share index TEDPIX wiped 378.60 points and closed at 77,045.3 points on Sunday, extending its losing streak for the sixth consecutive session.

The benchmark already suffered a setback on Saturday, retreating 610 points and dropping below the 78,000 resistance level to a three-month low.

Sunday’s trade volume was down $10 million to $84.3 million with over 1.1 billion shares changing ownership, according to TSE data.

The more nimble over-the-counter market, Iran Fara Bourse, shed 0.93 points or 0.12% to end Sunday’s trade at 795.44 points. Trade volume on IFB surpassed the TSE, with more than 390 million securities worth $127.4 million traded, according to IFB.

Close to 70% of TSE-listed companies posted losses for the day. Yazd Jooshkab Industries Company was the biggest loser with its shares dropping 4.8% to 10,407 rials.

On the other end of the spectrum, Alborz Pharmaceutical Company posted the biggest gains, going up 10.84% to 14,553 rials per share.

Iran Mobile Telecommunications Company weigh the most on TEDPIX, falling 3.17%, followed by SAIPA and Iran Khodro, the two biggest automakers, whose share value plunged 4.70% and 4.45% respectively.

This is while telecoms giant, Telecommunications Company of Iran, provided the biggest boost to the benchmark due to its heavy weight in the market, with a 0.04% nudge upwards.

Persian Gulf Petrochemical Industries Company and Jam Petrochemical Company were other major risers, though their gains were negligible as well.

  Market at the Automakers’ Mercy

The market has lost the drive for growth since the stocks’ rally in January, following the removal of sanctions against Iran’s nuclear energy program.

The investors’ ambivalence regarding the nuclear deal–reached on July 14 between Iran and six major world powers–and their frustration over the lack of tangible economic improvements since sanctions relief has led to a rout. The main losers are TSE’s industrial sectors that gained the most during the rally.

The auto industry was undeniably leading in price gains from the last Iranian year’s (March 2015-16) post-sanctions rally, rising over 210% in three last quarters of the year, over news that foreign auto manufacturers are vying to invest in the industry.

However, not much has materialized thus far. Many foreign firms have yet to sign agreements with Iranian producers, while others, it turned out, never officially planned to engage with Iran in the first place. The hype has evaporated and automakers have lost 17% since the rally peaked.

Experts believe the auto sector’s price correction, although the largest among all industrial sectors, is still dwarfed by its enormous gains from the rally, meaning the correction is most likely to continue.

The government’s overprotective policies have enlarged the auto industry so much that the whole market is at the mercy of the sector’s losses or gains, as evident in the benchmark’s seesaw trend in the post-sanction period due to the sector’s gains and losses, chief executive of Bank Ayandeh Brokerage, Fardin Aqabozorgi, told Donya-e-Eqtesad newspaper.

Aqabozorgi also said that even if a foreign automaker does initiate cooperation with an Iranian company, it will take some time before the venture can bear fruit and the investors can see actual profits, adding that emotional responses by traders were uncalled for.

Furthermore, the banking sector saw the second biggest price correction among sectors in the current year, as its index fell over 6%, undermining investor confidence in the economy.

According to the Wall Street Journal, Iranian banks have been unable to process international money transfer and finance trade freely in the months since the deal went into effect.

Also, some western banks have acknowledged avoiding dealings with Iran due to fears of crossing the US Treasury.