Economy, Business And Markets

End of Bear Market in Sight at TSE

End of Bear Market in Sight at TSEEnd of Bear Market in Sight at TSE

After massive equity market retreat within the past few months, bulls are expected to return, with equilibrium at Tehran Stock Exchange becoming more evident, head of the Securities and Exchange Organization (SEO), Mohammad Fetanatfard, said in an exclusive interview with the Financial Tribune.

Notwithstanding external triggers such as the ongoing nuclear talks, the stock market is expected to get back on track, said Fetanatfard, adding: “A comprehensive accord between Iran and the six world powers will unleash the true potential in Iran’s equity market, which is globally considered as an untapped market.”

“The steep fall in oil prices and the sagging global economy, accompanied by almost 60 percent plunge in iron ore prices and the slashed expectations on petrochemical earnings,” were cited by Fetanatfard as the main challenges facing the stock market, noting that the high banking interest rates, non-performing-loans (NPL), and lack of liquidity are also squeezing out all listed firms at the equity market.

He also mentioned inappropriate policies as a crucial factor that has crippled some companies in the stock market. “Unfortunately, no one takes responsibility for the unsound decisions, such as the feedstock pricing policy, which is pushing some industries off the cliff,” said Fetanatfard, observing that the offering of feedstock, imported using government-allocated hard currency (at official exchange rate) via the Iran Mercantile Exchange (IME) is forcing domestic companies to sell their commodities outside the IME, often at higher prices than set by the IME

He, however, noted that the feedstock prices are not expected to exceed 10 cents per pound, which could be considered as a glimmer of hope for direct foreign investment in the profitable petrochemical sector and a significant contributor to the gross domestic products (GDP).

While many organizations are engaged in decision-making in the capital market, Fetanatfard said the SEO has not been put in charge of monitoring these policies, creating many issues for leading industries such as oil and petrochemical sector.

“A money-market based economy will no longer help the industries, with the banking sector considered as the equity market’s rival, offering 22 percent or more in annual interest,” said Fetanatfard.

Money markets are used on a short-term basis, usually for assets up to one year. Conversely, capital markets are used for long-term assets, which are any asset with maturity greater than one year. Capital markets include the equity (stock) and debt (bond) market. Together, the money and capital markets comprise a large portion of the financial market and are often used collectively to manage liquidity and risks for companies, governments and individuals.

A variety of financial instruments including short selling have been designed to boost trades at the equity market, however due to the bearish trend, short selling is not expected to be launched in the near future.

Short selling is defined as the sale of a security that is not owned by the seller, or that the seller has borrowed. It is motivated by the belief that a security’s price will decline, enabling it to be bought back at a lower price to make a profit. 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.