Economy, Business And Markets

TEDPIX Falls as Large-Cap Stocks Languish

TEDPIX Falls as Large-Cap Stocks LanguishTEDPIX Falls as Large-Cap Stocks Languish

Stocks are not things to dabble in these days. Tehran Stock Exchange’s main index sank to its lowest in three months on Wednesday.

Equities have fallen for the 12th straight day, with no respite, as optimism about the post-sanctions era gave way to more immediate concerns about listed companies’ performance.

TSE’s primary index TEDPIX gave up a further 647.80 points or 0.85% to 75,982.6 on Wednesday, and broke below the 76,000 support level.

Wednesday’s performance was a grim finale to one of TSE’s worst weeks in the past two months. The benchmark was in freefall all week long, sinking over 1,400 points to its lowest since Jan. 31—the midst of the post-sanctions rally in stocks.

The smaller over-the-counter market, Iran Fara Bourse, also wiped its gains from Tuesday and fell to its lowest in two weeks. IFB shed 8.75 points or 1.09% to end at 794.11 points. It witnessed the trading of 281 million securities valued at $60 million.

TSE’s usual suspects, giant auto manufacturing, oil and mining companies, extended their losing streak and further pulled down the benchmark, while meager gains by small-cap companies and banks did little to change the market’s direction.

Trade volume on the TSE was up 14% compared to the day before, as more traders fled the market. Over 1.4 billion shares worth $271 million were traded on Wednesday, according to TSE data, with daily trade value jumping nearly 180% compared to the prior trading day.

Farabi Petrochemical Company was the day’s biggest loser, as its shares lost 5% to 4,275 rials each. The petrochemical producer was followed by Sakht Ajand Company and Luleh va Mashinsazi Iran Company in losses.

Kaveh Paper Company rose the most, jumping 4.99% to 5,405 rials per share.

  National Automaker

Iran Khodro, Iran’s largest automaker, was down 4.64% to 3,285 rials per share, after it announced it had not filed for revaluation of its assets in time.

To keep up with Iran’s high inflation, many companies revalue their fixed assets like buildings and property, and increase their book value accordingly.

This year, the automaker failed to take steps in time and utilize the tax exemptions it had that expired in March. That will increase the automaker’s tax costs among others, prompting the company’s executives to write a petition to the head of Securities and Exchange Organization to make an exception in their case.

However, IKCO’s rival SAIPA reaped the benefits. It revalued its assets last year, leading to a rise in its share prices. That along with IKCO’s losses helped SAIPA unseat IKCO as Iran’s largest automaker in terms of market capitalization for the first time in five decades.

Other auto producers also fell on Wednesday, shedding well over 4% of their shares’ value for the day.

  Rise and Fall

Bandar Abbas Oil Refining Company and Golgohar Mining and Industrial Company were the next primary market laggards, due to falling commodity prices, shedding 3.37% and 3.72% of their shares value, respectively. Crude oil fell to $45.32 per barrel, down 0.44% from Tuesday. Iron ore also fell 2.5% to $54.20 per ton, recording its sixth consecutive day of decline.

Bank Saderat provided the biggest boost to the benchmark, as its shares rose 2.52% to 1,017 rials, tailed by National Iranian Copper Industries Company and Omid Investment Company.

“It is as if freefalls after sudden growths have become a norm for the market,” said the managing director of Sepehr Investment Company, Behrouz Zare’.

According to Zare’, the main reasons for the market’s current dreary situation are skepticism regarding the positive effects of the nuclear deal, uncertainty over the ratification and details of the sixth five-year development plan (2016-21) and short-term profit taking.

Zare’ described the market’s post-sanctions rally as “completely emotional and illogical” and said market players make most of their decisions based on rumors spread on social media, while shying away from actual facts and statistics regarding company performance.

The lifting of sanctions imposed on Iran over its nuclear energy program in January, following the historic July 14 deal reached between Iran and six world powers, returned hope to capital markets and resulted in TEDPIX’s 18,000-point surge over three months.

Experts point out that the market rally took place during one of global and domestic economy’s worst phases. Crude oil price had reached historic lows of $20 per barrel, most metals were going through their worst routs since 2009, domestic housing market was depressed for well over two years and banks were yet to show any gain from sanctions relief.

Companies that gained the most over the post-sanctions hype and rumors are the main losers of the current market rout.