Economy, Business And Markets

Long-Term TSE Optimism

Long-Term TSE OptimismLong-Term TSE Optimism

Most experts and independent traders believe the stock market will remain flat for the remainder of the year before picking up in early 2016, with political and structural factors playing a prime role.

According to a survey conducted by Financial Tribune’s sister newspaper Donya-e-Eqtesad, while our stock market insight is largely based on expert analytics, the daily decided to take a more sociological approach by asking 22 economists and 40 independent TSE-floor traders several key questions related to the past, present and future of the stock market.

The results show a surprising divergence of opinion between economists and active traders on several topics. Not only are experts able to look at economic processes more objectively while traders show an active personal interest, but the channels of information these two groups depend on is also different.

In response to the decision made by the Securities and Exchange Organization to widen the daily price fluctuation limit from 8% to 10%, about 95% of the economists approved while 40% of the retail traders rejected the decision. The latter group argues that in a bearish market, the widening of allowed price movements will only push traders to make larger losses.

Another point on which traders and economists starkly disagree is the gradual expansion of the amount of listings on the primary market. Traders point out that more listings will only cause a wider dispersion of capital and make a lower amount of liquidity available to each company. Economists in contrast argue that this will in the long run positively impact the creation of liquidity.

In similar vein, only 26% of retail traders approved of the recent reopening of trade ticker symbols for several large mining, petrochemical and industrial companies against 77% of the economists.

But perhaps more important than these differences are similarities between the two groups on the government’s role and the future of market.

Both agree that stock prices are heavily dependent on government policy.

“The government is the only institution that can create the right political and commercial conditions,” an economist who only mentioned his last name, Nassirzadeh, said.

Indeed, share price movements have been directly related to optimism surrounding the nuclear negotiations. This dependency on politics looks set to continue in future, as listed firms will rely as ever on bilateral trade agreements, government price-setting, and tariff and import policy.

Most agreed that the slump over the last two years was the outcome of contractionary government policy aimed at taming high inflation rates. Falling oil revenues have further restrained the state’s ability to spend.

Global price movements will continue to influence the domestic stock market, as most of its listed tickers are related to the oil, petrochemical and mining sectors.

Prices in metals and oil have fallen sharply over the past year, but seem to have stabilized now. As a result, the majority of economists and traders believe the remainder of the current Iranian year (ending March 19, 2016) will be calm with few extraordinary price movements.

Everyone in the market, not least the government, is waiting for the end of sanctions and until then, major economic decisions are not expected.