Economy, Business And Markets

Fresh Liquidity Injected Into Capital Market

Fresh Liquidity Injected Into Capital Market
Fresh Liquidity Injected Into Capital Market

New liquidity injected into the country’s capital market during the past month helped the trading volume increase from 0.7 to 1.1 trillion rials, said Amir Hamooni, the CEO of Iran Fara Bourse or over-the-counter (OTC) market.

Hamooni told FNA that since February, a downturn dominated the capital market that significantly reduced the trades.

Despite what some analysts say, the situation in Iran’s capital market was not a stock market bubble, noted Hamooni, adding that by January 2014, there were trade expectations in the capital market that helped the indices rise to a record high of 88,750 points. “The inconsistency between the government and the parliament in setting the budget created an air of uncertainty in the market”, added Hamooni.

A stock market bubble is a type of economic event taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation.

The CEO also said that risk also exists in the market but when the margin dramatically increases and creates an ambiguous situation, it can’t be called risk anymore but it would be uncertainty that pushes the capital market into a gambling win-lose situation.

Following the tightening of international sanctions against Iran over its nuclear energy program, the TSE price index (TEDPIX) dramatically rose last winter, mainly due to a lack of investment opportunities in other sectors of the economy.

Experts disagree whether the growth in that period was a bubble that would burst, or whether it was an indication of a growing capital market. However, they all agree that the temporary growth of the stock market can never be taken as an indication of a growing economy.