Economy, Business And Markets

Gov’t, Banks and TSE Struggling to Restore Confidence

Gov’t, Banks and TSE Struggling to Restore ConfidenceGov’t, Banks and TSE Struggling to Restore Confidence

After protests by shareholders in front of the Tehran Stock Exchange on Hafez Street and nasty comments about stock manipulation and insider trading in the social media, the government has stepped up its intervention and officials are denying the allegations.

Shares on the TSE have lost a third of their value since their peak in January 2014. The losses have angered investors who say they are also being cheated by the big fish in the pond, saying the regulator is lenient on insider trading and that the large, well connected investors are receiving preferential treatment. Some investors even suggest that people inside the TSE and the Securities and Exchange Organization are involved in the game.

To quell dissent, Mohammad Fetanat, head of the SEO, called for government’s further backing of the stock market – something, as Financial Tribune wrote on May 23, would do more harm than good by disturbing the market’s freedom. In response, Ali Tayebnia, the minister of economic affairs and finance, told commercial banks to take “necessary measures” to financially support the equity markets.

The chief executives of the banks present in the meeting – including lenders Melli, Saderat, Tejarat, Sepah and Mellat – agreed to invest 50 trillion rials ($1.5 billion at market exchange rate) in the equity market, Eghtesad News reported.

“Current estimates show commercial banks bought around 1.5 trillion rials ($45.3 million) in securities in the 10 days to May 24,” an unidentified source told Bourse Press on Tuesday.

Bank Saderat was the top buyer of stocks, buying 500 billion rials worth of shares in the Tehran Stock Exchange. Tejarat and Mellat banks came second and third with 200 and 100 billion rials, respectively, said the source.

This was added to a fund previously created by the SEO to increase market liquidity by offering stocks. The fund has been criticized for trading based on orders from the SEO, using inside information and market manipulation, according to sources. The fund started running its pilot website just recently, after two years of obscure trading.

As for the effects, TSE’s main gauge has fallen 0.2 percent in the past two weeks. The free float index, which is a more accurate reflector of the market’s moves lost 0.4 percent during the same period. Both indices are hovering above eight-week lows. To be fair, the banks have succeeded in taking the edge off the market’s fall, and creating a flat, morbid trend.

But the continuation of supporting or meddling in the market will only shake investor confidence in the market. Furthermore, it will put unnecessary strain on banks that are already in bad shape.