Stocks at the Tehran Stock Exchange switched between small gains and losses on Wednesday, finishing a seesaw trading day, going flat after two straight upward trend sessions.
The TSE stocks closed after a mixed trading day with the market's main index (TEDPIX) slipping just 3 points to 71,927.1. The market is trying to pick up after a two-day rally hoping that it won't return to the negative trend of the past few weeks.
According to the TSE website, after a mixed trading day, the first market index moved up 62.4 points or 0.12 percent to 52,879.1. The free floating index, one of TSE's other indices, pushed the TEDPIX into the red. The free floating index was down 119.8 points or 0.15 percent to end its negative trend at 80,959.3. The blue chip index was among the indices that underperformed and went down 4.1 points or 0.12 percent finishing at 3,317.9.
The equity market has persisted to stay in green with the contribution of the other two major indices. The second market index gained 367.5 points or 0.26 percent to 142,178.5. The industry index inched up 19.7 points or 0.03 percent to 60,923.4.
The volume of shares changing hands in the TSE was slightly lower than Tuesday. More than 424,377,000 shares were traded in total, valued at 1.3 trillion rials, around 3 billion rials less than the previous trading session.
Due to ongoing economic stagnation, the equity market, which represents the functionality of industries, is struggling with limited financial resources and illiquidity.
On the other hand, the administration is following concrete plans to boost the capital market in the hope of changing its negative trend, while helping industries to completely exit recession.
The equity market's shaky investors expect an acceleration of economic recovery, but won't easily trust the statistics, while lack of transparency is one of the most crucial laggards to the equity market. When it comes to investment, investors prefer to take a cautious approach based on sensibly sourced information from the equity market while looking for quick return investments.
Market stressors have partially dominated the national financial system including the TSE and Iran mercantile exchange. The government's precautionary moves, including a contractionary policy toward the economy, are expected to help the TSE move back on track. But this may not happen in next few months, analysts believe.
A variety of factors have contributed to the market's negative trend in the past 3 months, causing turbulence in the TSE and other financial markets. The most notable ones are the country's ongoing recession, lack of liquidity in the capital market, lack of transparency in the listed company's financial reports, which heavily weighs on the investors approach in the equity market.
The ongoing unrest in regional countries, namely Iraq and Syria, is also contributing to the lackluster performance in the TSE. Due to the turmoil in Iraq, Iranian firms are faced with over-supply and have lost some of their exports to the region, lowering expectations on the company's earnings.
TSE Potential
Despite some challenges ahead like political risks of investing in Iran, money transferring limitations – both part of the legacy of international sanctions, high inflation and the depreciation of national currency, TSE has proved its potential in 2013.
Tehran’s benchmark stock index surged 130 percent in 2013 to a record high, beating returns posted by the 93 major global equity gauges tracked by Bloomberg.
National growth is improving and the wider economic picture is more encouraging as the country is on its path of stability.
The TSE has started to use the XBRL standard (eXtensible Business Reporting Language). It is a language for the electronic communication of business information, providing major benefits in preparation, analysis and communication of business information. It offers cost savings, greater efficiency and improved accuracy and reliability to all those involved in supplying or using business information.
The move will help the SEO to maintain a fair and efficient capital market. All listed companies are mandated to file their information electronically via the Comprehensive Database of All Listed Companies' (CODAL’s) website and in accordance the XBRL's and other SEO's compulsory regulations.
Iran, as a frontier market, is expanding its ties with other nations, a move that will open new horizons for some key industries.
Given the tension between Russia and the West over Ukraine, the European Union is mulling over imposing more measures to curb Russia's access to global capital markets.
Recently, Russia has been striving to open new trade channels with Iran to bypass the western sanctions and rely more on the Asian countries, Iran in particular.
Moscow has recently eased entry for Iranian companies to operate in Russia.
As a widely lucrative market, Iran is regaining its key role in the world economy. Iranian industries should grab this chance and extend their activities overseas.
The equity market as the face of the national economy will soon benefit from the changes. Considering the Rouhani administration's growth-oriented economic policy, and the recent reports of growth in the first quarter of this year (March 21-June 22), the TSE is likely to head back to its 2013 peak. It may not happen within 2014, but based on the economy's prospects, Iran will entice frontier investors in the near future.
