Economy, Business And Markets

Small Industries on Top of Equity Market

Small Industries on  Top of Equity Market
Small Industries on  Top of Equity Market

Lately, the equity market has been demonstrating volatility, pushing the market mostly into red, but the Tehran Stock Exchange main index (TEDPIX) has stood in green territory for eight consecutive working days.

All of the TSE’s indices went up and shaky investors wiped out some of their losses which were piled up due to the downtrend of the equity market in the past six months.

For the week ending on September 24, the TSE’s benchmark climbed 345 points or 0.48 percent to finish 5 continuous rallies at 71,788.1. The first market index went up 296 points or 0.57 percent to 52,729.5. The second market index rose 414 points or 0.29 percent to 142,197.7. The free floating index soared 847 points or 1.06 and topped all other indices, ending at 80,999.5. The industry index edged up 278 points or 0.46 percent to reach 60,861.6. The financial index ticked up 811 points or 0.63 percent to 129,343.8, and the blue chip index in line with other indices stood in green with a 0.54 percent increase to 3,305.4, according to the TSE website.

The TSE signaled its potential for fresh hikes to approach its 2013 peak and stood up for eight consecutive days, though the TEDPIX is still far away from its record high last year as it has dropped close to 9.1 percent since the beginning of the current Iranian year – which started March 21.

From the start of week on Saturday till Wednesday’s close, almost 1.81 million shares traded at the Tehran Bourse, valued at 4.759 trillion rials, indicating 24.6 percent plunge compared to last week.

Within the same period, 324.894 fixed rate bonds were traded, valued at 325 billion rials. Totally, close to 5.2 million fixed rate bonds changed hands since the end of March, valued at 5.2 trillion rials.  

Since the beginning of this year, 75.655 trillion shares and subscription privileges changed hands, valued at 331.729 trillion rials.

Unsettled investors are closely watching the bullish trend. Yet, economic uncertainty, coupled with the banks’ diminished foreign currency reserves, has weakened the capital market, as the volume and value of the market proves the prevailing ambiguity in the stock market.

As the equity market is likely to gear up for a consistent uptrend in the upcoming trading days, the Central Bank of Iran has announced that Iran’s GDP growth has hit 4.6 percent.

Iran’s GDP based on prices set in the Iranian fiscal year of 1383 (March 2004-March 2005) increased by 4.6 percent this spring (March 21- June 21), compared with the same period last year, the CBI reported on Thursday.

This breakthrough along with the whisperings about a positive atmosphere of the nuclear talks between Iran and the P5 + 1 -- which is currently ongoing in New York, is likely to influence the trades in the equity market, analysts believe.

 Small Industries on Top

 As mentioned in the TSE report, within the first and second quarter of the Iranian calendar, which ended September 22, small industries beat the expectations and topped the leading industries in the equity market.

As market analysts believe, there are a variety of contributors that helped small industries to surpass current market leaders in the capital market. These indicators are as follows:

 Lower shares prices and the subsequent increase in liquidity. These industries mostly absorb investors who are in favor of short-term investments. Due to the recent stagflation of the national economy, the stock market is grappling with lack of liquidity.

 More flexibility in the government’s policymaking. While small industries are not seriously impacted by the core economic policies, those policies may limit their activities.

 As market speculators have more tendency to short-term trades of famous industries, more room is provided for the small enterprises to grow.

 Pricing policies are less likely to influence the small industries.  

 Small industries are not vulnerable to export restrictions -- a significant setback for primary industries in the international market – mainly the legacy of western sanctions against Iran over its nuclear program.

  The petroleum-based feedstock price is another impediment for big industries, as fluctuations in the price and lack of enough offering in the Iran Mercantile Exchange —which led them to supply their required feedstock through the free market price, will drastically impact production, sales and productivity. Again, small companies are not prone to these limitations.  

“Despite the bullish trend of the small industries in the equity market, some challenges are lingering in these industries, while due to the lower Price Earnings Ratio (P/E), their shares enjoy more liquidity and the overall prospect of the category remains positive,” Rouholah Hosseini Moghadam, head of the TSE publications office said to Donyaye Eghtesad on Thursday.

 The individual investors of the equity market are awaiting six-month reports of the listed firms at the TSE. Analysts forecast that companies will continue to narrow their losses toward positive earnings per share and the bearish trend will leave the market in due time.