Economy, Business And Markets

Dovish Signal Triggers Rally at TSE

Dovish Signal Triggers Rally at TSEDovish Signal Triggers Rally at TSE

Stocks staged a broad rally on Wednesday with nearly 73 percent of listed companies outperforming to help TEDPIX soar 1.6 percent to recoup part of the massive losses it had accumulated since April 5.

The rally comes after US Secretary of State John Kerry signaled for the first time on Tuesday that the United States was prepared to ease economic sanctions on Iran "without fully resolving evidence", the New York Times reported.

Kerry suggested major sanctions might be lifted long before international inspectors get definitive answers to their longstanding accusations about Iran’s nuclear energy program.

  Biggest Rally in 2 Months

Stocks were in rebound mood at Wednesday trading with TSE benchmark registering its biggest rally since April 5, jumping 1,000.8 points or 1.6 percent to settle at 63,559.7.

After both institutional and retail investors digested the news, they lined up for TSE shares that had hit their rock-bottom value to garner shares even below their intrinsic value and hedge their bets.

The perceived high-yielding companies nearly reached their positive volatility cap with trading volume and value registering tangible growth compared to the prior trading day.

According to TSE data, the first market index rose 698.4 points or 1.55 percent to end at 45,738.7. The second market index pulled up 2,212.3 points or 1.71 percent to 131,900.3. The free float index notched up 1,321.4 points or 1.85 percent to 72,659.8. The industry index gained 667.1 points or 1.29 percent to 52,118.6 and the blue-chip index climbed 58 points or 2.03 percent to close at 2,910.

More than 667 million shares changed hands valued at close to $42 million to post a 45 and 40-percent surge in trade volume and value respectively.

Persian Gulf Petrochemical Industry Company, which has the highest market cap at the equity market, topped the list of positive contributors to TEDPIX. Tamin Petroleum & Petrochemical Investment Company and Bank Mellat with 103 and 94 points followed the PGPIC.

Pars Oil Company, Mobile Telecommunications Company of Iran and Iran Transfo slightly weighed on the TSE gauge.

TSE’s dented sentiment is representing the current state of economy, which is grappling with credit crunch, recession, severe sanctions and global slowdown. However, massive rallies like the one on Wednesday indicate TSE’s enormous potential.

No concrete change in economic policies or indicators has recently occurred to trigger such a massive uptrend at the equity market, which points to investors’ tendency to shrug off even the companies’ positive adjustments. Instead they are gearing up to shore up their portfolio once the equity market’s most crucial systematic risks fade away.

Analysts have pointed out some other triggers, including the latest speculations about probable discount on feedstock prices and a possible launch of Treasury Stocks, which are the portion of shares that a company keeps in their own treasury.

Treasury stocks may have come from a repurchase or buyback from shareholders or it may have never been issued to the public in the first place. These shares don’t pay dividends, confer no voting rights and should not be included in shares’ outstanding calculations.

  TSE’s Great Potential

Iran’s 48-year-old TSE has a current market value of around $85 billion, features 316 listed companies classified in 39 industries (the most diversified in the region) and the lowest average PE ratio of 5.22 compared to MSCI emerging market index of 28.99.

The recent massive retreat in earnings is mostly because of the economic sanctions, which have hindered the process of transferring money, which has kept international fund managers away from Iran’s lucrative stock market. However, the lifting of sanctions can absorb millions of dollars to Iran’s fast emerging economy.

 The list of attributes Iran possesses is impressive. It has the second largest population in the Middle East with about 80 million highly educated and skilled workforce, 9 percent of proven oil reserves, 18 percent of proven gas reserves and an abundance of minerals.

The tremendous investment opportunities in TSE conglomerates, amid speculations and growing optimism that sanctions will be lifted has piqued international fund managers’ attention, as they are already preparing a sound plan for the post-sanctions era.