Economy, Business And Markets

New Indices on the Way to Equity Market

New Indices on the  Way to Equity Market New Indices on the  Way to Equity Market

Launching new equity market indices, the Financial Stability Committee's (FSC's) agenda, introducing new financial instruments, the panics surrounding the equity market, online trade at the Iran Mercantile Exchange (IME) and globalizing Iran's equity market were the key areas Mohammad Fetanatfard, the head of the Securities and Exchange Organization (SEO) referred to at a press conference held on Saturday.

To address the concerns over the calculation of equity market indices, Fetanatfard said the SEO has planned to introduce new indices before the end of the current Iranian year on March 21.

"The required software is being prepared based on a mid-run plan. The accuracy of the data is being checked and the new indices will be posted on," he added.

Referring to the FSC, Fetanatfard said such committees exist in different countries to help the equity market at the times of unprecedented fluctuations in the benchmark. "Since the performance of many listed firms at the equity market is tied to various organizations, we concluded that the FSC is needed to address the problems in the stock market," he said.

He further noted that regular meetings held by the FSC have yielded positive results regarding three listed industries at the equity market; adding that the other listed industries which are grappling with challenges will be analyzed soon to eliminate the uncertainties. Fetanatfard went on to say that the FSC will soon reveal these results.

The equity market has been witnessing breathtaking ups and downs within the past 12 months as fears gripped investors in light of the tumbling oil prices, mining loyalties, sagging global economy, and the drop in global iron ore price, said Fetanatfard, adding: "Lineups to get rid of shares are the result of overreaction by unsettled investors and not quite unexpected, as it is observed during an upsurge at the stock market that the investors flock to grab the opportunity of garnering the shares."

The SEO head also mentioned lack of market makers and financial instruments as other factors responsible for the equity market downturn.

Introducing new financial instruments in the equity market was another upbeat news declared by Fetanatfard at the press conference.  

"The SEO has designed new financial instruments, such as short-selling, which is expected to help the market greatly when suffering from volatilities."

Short-selling is motivated by the belief that a security's price will decline, enabling it to be bought down to a lower price to make profits. Short selling may be prompted by speculation, or by the desire to hedge the downside risk of a long position in the same security or a related one. Since the risk of loss on a short-sale is theoretically infinite, short-selling should only be used by experienced traders who are familiar with its risks.

Fixed rate bonds with floating rate, are the other financial instruments introduced to help the equity market by adjusting the value fluctuations.