Stocks on Tehran Stock Exchange continued their rally into their fifth week and closed just shy of their highest in 14 months, on the prospect of a speedy recovery following the removal of sanctions.
Iranian equities trend in a direction opposite of Persian Gulf littoral states whose fortunes are entangled with plummeting crude oil prices.
The ongoing drop in oil prices led Middle Eastern markets to their worst January in at least a decade.
Unlike Iran, which had been dealing with slashed revenues and struggling with economic problems in the past few years, other Persian Gulf nations are descending from high points and are taking more damage from the oil slump.
Stocks in international markets fell during the past week after German manufacturing cooled, adding to further worries over Europe and the wider global picture.
Concerns about a global demand slump and policymakers’ response to a slowing growth worldwide are even fuelling expectation that the US Federal Reserve may hike interest rates at a slower pace than previously announced.
For investors in Iran, improvement in business activity due to the end of economic isolation, reconnection with international financial markets, Iran’s 500,000-barrel-per-day hike in crude exports and multibillion dollar deals in auto manufacturing and aviation sectors signed between the Iranian government and European giants overshadowed nervousness over the global economic outlook.
Slowdown From Prior Week
TSE’s main index, TEDPIX, advanced 2,673 points or 3.7% for the week and closed at 73,684 points on Wednesday. This marks a slowdown compared to the prior week’s 6.6% surge.
TEDPIX climbed 15% this January to a 13-month high of 71,011 points. The benchmark index has gained 16% since the lifting of sanctions on Jan. 16. It was hovering near two-year lows a couple of months back.
This trading week was a mix. TEDPIX lost almost all of Saturday’s gains on Sunday, when stocks edged down 0.3% bringing an eight-day winning streak to an end.
The brief pause was followed by a 2,600-point jump in the following two days as more deals and rumors of deals with foreign companies pushed shares higher. Rumors of a possible deal to cut crude output between OPEC and non-OPEC producers helped oil recover some lost ground, boosting Iran’s petroleum-heavy market.
The upsurge buckled again in the last day of trade, as investors closed their positions and locked in the week’s profits. Stocks paused on Wednesday, moving 41 points lower to the day’s finish.
Most of the trading revolved around financials, mainly banks, which may gain access to foreign financing and lower their cost of money. They also are racing to cover demand for renewed foreign business.
Trading volume held steady near two billion shares per day for the week—a record in itself since it barely reached 500 million shares a day for much of the past two years and averaged 1.86 billion shares per day. Trading hit an all-time high of 2.85 billion shares on Jan. 27.
The rally is being helped along by international investors whose trading increased to 500 billion rials ($16.6 million) in the 10 days through Jan. 26, according to Hassan Qalibaf-Asl, the chief executive officer of TSE. That compares with about 50 billion rials in the 10 days prior to the nuclear deal’s implementation on Jan. 16, according to Bloomberg.
Mirroring Moves
The smaller Iran Fara Bourse over-the-counter exchange market mirrored TSE’s moves during the week, albeit with less gusto.
IFB’s main index is now at its highest in six months. IFX finished the week 5% or 35.66 points higher at 792.14 points. The index gained four out of five trading days and only fell on Sunday. It has gained 11.3% since the nuclear deal took effect.
IFB weathered the two-year bear market better than the TSE and its rebound has been less volatile.
Most institutional analysts contacted by Financial Tribune remained skeptical of the ongoing rally, saying market fundamentals have remained unchanged. They were unsure of the rally’s pace, though they agreed the TSE is experiencing an uptrend.
They believe it will take a year for the effect of sanctions relief to filter into corporate earnings and thus the current market moves may prove to be a bubble.
Here, the lifting of sanctions is the winning ticket for Iranian equities amid global turmoil. The optimism and removal of the greatest cloud of uncertainty over Iran’s economy are outweighing poor domestic and international economic conditions.
