A market expert in Tehran has urged the government to help control “systematic risk” at Terhan Stock Exchange, an attempt he believes can encourage more investment in the equity market.
“To develop the equity market, the government should protect it from flight of capital into other markets by offering tax incentives, thus reducing its systematic risk,” chairman of the board of the Iranian Institutional Investors Association (IIIA) said earlier this week.
More investors should obtain transaction codes and the government’s effort is important in this regard, Alireza Asgari Marani said in a meeting with IIIA members, as reported by IRNA.
Curbing Rumors
Institutional investors’ large scale of investment and liquidity gives them a better view of the market and increases their influence; therefore, they are in a better position to counter market rumors, CEO of Ghadir Investment Co. Alireza Soleymani said in the same meeting.
He believes that the present market conditions are the result of general economic and monetary situation.
“Institutional investors play an important role in increasing investor confidence, but currently they do not play that role properly,” Soleymani said.
Some of the rumors circulating the market are “false and groundless,” and major investors believe that a market that is easily moved by rumors should not be invested in. Access to in-depth information on companies enables institutional investors to make better and more profitable decisions.
“If we fail to uphold confidence in the market, we cannot expect any government help,” the CEO asserted.
Information Accuracy
The CEO of Nikigostar Investment Advisor spoke of the importance of “information” in the equity market, saying that the country’s general investment policies have yet to be announced and “every delay creates more information insecurity.”
“The government should work out its policies about the investment industry to prevent further damage to companies,” Ali Rahmani said, adding that “the government has, of course, made some progress in this regard.”
He also criticized the high interest rates offered by commercial banks. “Some banks are offering near 30 percent interest on deposits and this is drawing money away from other markets.”
Long-Term Investment
“The stock exchange has been established in a bid to collect small funds and channel them for the execution of large projects,” said the CEO of Parsian Brokerage Co.
“Many market analysts have started using technical analysis and stopped using fundamental analysis; even some leading companies have stopped using fundamental analysis in making investment decisions,” Ebrahim Enayat said.
“Economy, industry and company analysis are the main focuses of fundamental analysis, but unfortunately, experts mostly neglect the first two in their analysis nowadays,” he added.
Price to earnings ratios in the current market is extremely low, and this is because of the short-term investment outlook. In other words, a more long-term investment outlook will drive prices higher, which will increase the ratio in turn.
Budget Outlook
The Securities and Exchange Organization (SEO) is seeking to draw up proposals for the Sixth Five-Year Economic Development Plan and annual budget, Amir Hamzeh Malmir, a deputy of the SEO said.
Following last year’s “unreal expectations” in the market, many institutional investors only looked to buy into the bull market and paid little attention to stock fundamentals, Malmir said.
“Currently the stock market is shallow and this is the result of a low free float [the majority of the shares of many listed companies are still owned by the government],” he noted.
Free float or public float represents the portion of shares of a company in the hands of public investors. This number is sometimes a better way of calculating market capitalization because it provides a more accurate reflection than the entire market capitalization.
“As long as the real economy does not improve, we cannot expect the capital market to experience growth,” he said.
