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Markets Drop Further in June

Markets Drop Further in JuneMarkets Drop Further in June

Stock markets remained stable as volatility subsided in the last week of June, as Iran’s isolation shielded it from the global turmoil that rocked markets after British voters decided to leave the European Union.

June was terrible for stocks on both Tehran Stock Exchange and Iran Fara Bourse. The larger TSE lost 2144 points or 2.8% while the smaller IFB shed 44 points or 5.3%.

The TSE, which has been falling for the past quarter, clawed back some of its losses. Its main index, TEDPIX, climbed for the second week after four weeks of back-to-back losses.

The announcement of a united move among large banks to cut deposit rates by 200 basis points to 16% bought stocks a much-needed respite from decline.

Shares on TSE took small hits on Saturday and Sunday before a 447-point jump to a 2-1/2 week high on June 28. However, the gains were not to stay. After Tuesday’s rally, stocks took a 0.34% hit on Wednesday, closing the week 0.36% higher.

Metal producers and automakers were the leading gainers of the week’s trade, followed closely by paper producers.

Trade volume picked up as the week progressed, almost doubling to 1.3 billion shares on Wednesday. Nine trillion rials (about $255 million at current market exchange rate) worth of shares changed hands on the market, up 8.4% for the week, according to TSE’s data.

Stocks edged lower on IFB for the week. The market’s benchmark, IFX, opened seven points lower on Saturday but climbed 1% till Tuesday. Wednesday’s rout wiped all that gain and more. IFX ended the week at 775.87 points down 0.2% and wiped 10 trillion rials ($283 million) off the market.

Trade volume dipped from 1.45 trillion rials at the start of the week to 660 billion rials on Wednesday, contrary to the pickup in trading at TSE. Bond and exchange-traded funds trading on the exchange also took a hit, plunging 42% and 46% respectively compared with the prior week.

With the hype of sanctions relief fading, the poor financial condition of companies has traders on a rope these days. Corporate earnings outlooks are poor and there is little cause to think they may recover anytime soon.

Few companies have healthy cash flows. A crunch in bank lending and low consumer spending is putting companies out of business.

There is also disappointment over the outcome of the nuclear deal signed last July that saw the lifting of sanctions against Tehran’s nuclear program. Iran is having trouble turning its many memorandums of understanding into binding contracts and business investment.

The shady dealings of quasi-state organizations have scarred potential investors who fear unknowingly breaking non-nuclear sanctions may bring upon punitive measures.

Financialtribune.com