Stocks snapped their downtrend and rallied in Tehran on Monday, as political worries took a pause and low prices spurred bullish bets.
Those worst affected by the rout in the past days rose the most. Financials, miners, automakers and investment companies led the Monday rally.
Most Iranian markets, including the foreign exchange market, seemed untouched by tumbling crude oil prices, which fell as a deal to freeze oil output by OPEC and non-OPEC producers fell apart on Sunday after Saudi Arabia demanded that Iran join in despite calls on Riyadh to save the agreement and help prop up crude prices.
However, refiners and petrochemical producers lost ground as a result.
Shares on both Tehran Stock Exchange and Iran Fara Bourse over-the-counter market have taken a beating in the past week in their worst rout in nine months.
Most analysts saw it as the culmination of a market correction, coupled with reaction to disturbing political news.
Investors fled stocks as political strife over the efficacy of the nuclear deal signed in July between Iran and the P5+1—Britain, France, China, Russia and the United States, plus Germany—which ended a decade-long dispute over the scope of Tehran's atomic energy program—fueled speculation of its undoing.
> Political Pressure
The government of President Hassan Rouhani is under pressure by domestic opponents of the nuclear deal, including critics in parliament, who contend the landmark accord has not produced the promised fruits and that the government has not been able to properly respond to the perceived failure of the US to uphold its end of the deal, particularly with regard to the banking sector.
Furthermore, regional worries arose after an anti-Iran communiqué was passed in a summit of the Organization of Islamic Cooperation in Istanbul last week. The move prompted President Hassan Rouhani and Foreign Minister Mohammad Javad Zarif to decide not to attend the closing session of the top-level gathering.
"The anti-Iranian statement by OIC members and hopelessness over some of the results of the nuclear deal were the forces behind the rise in the number of sellers in the stock market," Ali Rahmani, the head of Iranian Association of Internal Auditors, told Bourse Press.
This is while some analysts have been dismissive of the rout, calling it a market overreaction.
"Correction in some industries has already happened and anything more is overreaction," says Fardin Aqabozorgi, Ayandeh Brokerage's chief executive.
"In the past few days, the market changed in such a way, as if all analysis pointing to improvement in the economy and political relations has been completely forgotten."
> Market Rallies
Shares on Iran Fara Bourse snapped back, almost erasing two days of losses. The market's benchmark, IFX, jumped in the first hour of trade and despite paring some gains, closed 2.09% higher at 774.35 points on Monday.
Small financials led the rebound on IFB. Iranian Investment Incorporation surged 5%—daily stock gains are capped at 5% in Iran—on Monday.
Sarmayeh Bank, Iran Cultural Heritage and Tourism Investment Group were both up over 4.9% for the day. Yazd Alloy Steel Industries and Northwest Housing Investment rose over 4.8%.
The IFX dipped 45 points to 758.55 points in the preceding three trading sessions to its lowest since February 1, in the market's worst drop in nine months.
Gains were smaller on the larger Tehran Stock Exchange. Benchmark index, TEDPIX, climbed 1.19% to 78,435.40 points on Monday, coming off its lowest in two months. TSE's Free-Float Index, which weighs stocks based on their floatation, advanced 1.61% to 89,097.80 points.
Mobarakeh Steel, Omid Investment Company, Golgohar Mining, SAIPA automotive company and industrial holding MAPNA led the market rebound.
Stocks had been plummeting for eight straight days before the Monday rally in their worst drop in nine months, dragged down by automakers, miners and refineries.
> Dollars, Oil and Gold
Activity in the foreign exchange market was minimal with gold coins and dollars edging up slightly. The greenback edged up 0.03% to 34,610 rials on Monday, off a three-week low.
Azadi gold coin, the main vehicle for gold investments in Iran, remained unchanged at 10,290,000 rials, despite bullion's gains in global financial markets
Gold rose on Monday after oil producers failed to agree on an output freeze, sending crude prices and equities tumbling and stocking safe-haven demand for bullion, Reuters reported.
Spot gold rose to a session high of $1,239.30 an ounce, before giving up some gains to trade up 0.3% at $1,237.80 by 1243 GMT, Kitco data show.
Oil tumbled by the most in two months after output talks on Sunday between the world’s biggest producers ended without any agreement on limiting supplies, a diplomatic failure that threatens to renew the rout in prices, Bloomberg reported.
Futures fell as much as 6.8% in New York, the biggest intraday drop since February 1. The summit in the Qatari capital, which dragged on for more than 10 hours beyond its initially scheduled conclusion, finished with no final accord.
There were significant hurdles to any deal after Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman said the kingdom would not restrain its production without commitments from other major producers, including Iran, which has ruled out freezing for now.
US crude futures slid as much as 6.8% to $37.61 a barrel, while Brent futures dropped 7% to $40.10 a barrel, according to Reuters.
