Economy, Business And Markets

Capital Markets Gaining Traction

Finance Desk
Capital Markets  Gaining Traction
Capital Markets  Gaining Traction

The 9th International Exhibition of Exchange, Bank & Insurance opened in Tehran on Sunday with government officials and public sector and private bank CEOs in attendance. The three-day event –which is the biggest of its kind – brings together 340 plus financial and stock firms, both domestic and foreign.

Vice President Es'haq Jahangiri, who was among the keynote speakers, said the time has come for the country to rely on the capital market for financing its long term projects and thereby take the pressure off the banking sector–which finances over 90% of the economy.

"Banks should only finance short and medium-term projects as well as the SMEs. But long-term finance should only come from the equity market and big companies should also rely on the capital market for financial empowerment," Jahangiri said.

He recalled the big wave of bond offering last March by the Oil Ministry which saw 50 trillion rials worth of bonds sold in one day, saying that that was evidence of great potential for stock market growth.

"We should reach a point where corporations can also issue bonds without the need for bank guarantees," he said.      

  Equitable Distribution  

Economy Minister Ali Tayyebnia told the conferees that the country is working to achieve a 5% growth in the current fiscal year that started in March and 8% growth in the medium term.

“We are cautious in trying to achieve this growth without compromising our achievements in curbing the inflation rate and also ensure intersectoral cooperation to distribute the benefits of prosperity to all sections of the society,” he said.

Tayyebnia acknowledged that to secure such feats, deep structural reforms are crucial and urged all sectors to prioritize the revival of domestic manufacturing.

“One area that should be targeted by reforms is the finance sector which includes resolving the credit crunch,” he said. “Programs are   underway to address the credit crunch and includes the recapitalization of banks, repaying government debts to banks and gradually putting an end to the non-banking activities of banks.”

The minister also pointed to the launch of a debt market last year and the issuance of 3 trillion rials ($97 million) worth of mortgaged-back securities (MBS) last week as a starting point for recuing government debts and increasing the capital of banks.

The government issued 158 trillion rials ($5.12 billion) worth of Islamic Treasury Bills last year and further plans to issue 400 trillion rials ($13 billion) worth of bonds in the current fiscal year that ends in March 2017. The bonds will be issued to help repay government debt to the private sector.  

In another development the Tehran Stock Exchange (TSE) joined the World Federation of Exchanges (WFE). The Securities and Exchange Organization has unveiled its platform for hosting venture capital funds to help expand tech companies.

“Last year, we increased the share of capital market finance to one quadrillion rials ($32.4 billion) from the previously 300 trillion rials ($9.7 billion)  ,” Tayyebnia said.

“We want to move away from a bank-based economy to a capital-based economy.”

  Stocks on the Rise

Mohammad Fetanat, head of the Exchange and Securities Organization pointed to the progress of the body he has been leading since December 2014.

“The volume of our sukuk market has risen from 72 trillion rials (3.3 billion) to 215 trillion rials ($6.97 billion) and we have issued 10 trillion rials worth of Islamic treasury bills,” he said.

Fetanat hoped that the equity market’s primary tools–sukuk and Islamic treasury bills– will experience a growth similar to the stock market’s regular financial tolls.   

He announced plans to educate the public about the tools that the equality market provides, especially attractive features inherent in the sukuk market.

Other keynote speakers included the Central Bank of Iran’s governor, Viliollah Seif and Abdolnasser Hemmati, head of the Central Insurance of Iran. The event will run through July 13.