Domestic Economy

Tehran Stock Market Collapses Following Trump’s Win

Business & Markets Desk
TSE’s main index took a 1.83% dive, while the smaller Iran Fara Bourse’s benchmark plunged 2.4%
Equities had the largest drop since April 16.
Equities had the largest drop since April 16.

Tehran's markets got rocked by Donald Trump's election as the 45th president of the United States on Wednesday, as investors fled equities and piled on foreign currencies and gold in their safe haven search.

Trump's election creates new uncertainties for the global economy and might disrupt trade at a time when growth is already fragile.

"Donald Trump's election victory is unleashing shockwaves throughout financial markets, as investors scramble to gauge the impact of the White House campaign that defied the odds," wrote Bloomberg.

The shockwaves certainly hit Tehran where equities had the largest drop since April 16, as the fate of the nuclear deal with the West became cloudy.

Trump's election, in repudiation of America's political establishment, is likely to reorder the nation’s priorities and alter its relationship with the world.

He had criticized outgoing President Barack Obama for not taking a tougher line in reference to the historic nuclear deal Iran signed with five other world powers last year, which paved the way for the removal of most sanctions against Tehran.  

"Trump, 70, will have a Republican-controlled Congress to enact his agenda and the ability to appoint Supreme Court justices in the coming years," wrote Bloomberg.

> Markets Stumble

Tehran Stock Exchange's fragile rebound ended abruptly and the market took a 1.83% dive, while the smaller Iran Fara Bourse broke its rally with a 2.4% drop.

All industries fell across the board led by petroleum companies, which were riling from a 4.3% WTI crude in the initial aftermath of Trump's victory. However, oil erased losses as global markets weighed the Republican president-elect's victory speech. WTI was down 0.6% at $44.71 by 1247 GMT.

Trump's speech came too late for Tehran's equity markets. TSE's main index ended the day 1,459 points lower at 78,418.6 points on Wednesday, while the IFB's benchmark, IFX, lost over 20 points and finished the day at a 12-day low of 819.19 points.

The volume on TSE jumped by a third from the previous day to $79.6 million, while $103.6 million worth of shares were traded on IFB.

Futures on the S&P 500 Index initially plunged by a 5% limit that triggers trading curbs and European equities sank the most since the aftermath of Britain’s shock vote to leave the European Union, Bloomberg reported.

Later, soothing comments by the president-elect in his victory speech helped global stock markets erase a large chunk of their earlier losses.

In Europe, Germany's DAX was down 0.7% at 10,408 while the FTSE 100 index of leading British shares was 0.1% lower at 6,838.

US stocks are expected to open lower, too, though by far less than earlier predicted, according to AP. Dow futures are 1.7% lower at 17,974 while the broader S&P 500 futures were down 1.8% at 2,097.

> Tehran's Search for Safety

Investors frightful for Iran's future after Trump's presidency rushed to the shelter of foreign exchange and gold.

Even the US dollar, which took heavy beating in international markets, rose against the rial by 0.47% to 36,530 rials by 1247 GMT on Wednesday, as Iranian investors preferred the safety of the world's reserve currency to the rial.

Other currencies had stronger gains. The yen surged 2.86%, the euro 0.89% and the pound sterling 0.71% against the rial.

Bullion earlier surged as much as 4.8% to $1,337.38 an ounce, which pared gains after the initial shock abated and was up 2.34% to 1,304.34 by 1247 GMT. A rally in gold mining shares, which earlier jumped as much as 12% in South Africa, also subsided.

Tehran's gold markets followed international developments closely, though volatility was more contained.

The Imami bullion coin–benchmark for Iran's gold trade–rose 1.35% to 11,355,000 rials by 1247 GMT.

Trump's campaign was marked by fiery anti-foreign rhetoric and promises to tear up trade deals, restrict immigration and lock up political rivals, AP reported.

He was more conciliatory in his victory speech, arguing he would seek good relations with other countries.

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