Economy, Business And Markets

Equities Drop Ending 6-Week Rally

The TSE gauge lost 310 points during the week and finished at 77,879 points
TSE trade volume dropped 13% compared to the week before to reach $271 million.TSE trade volume dropped 13% compared to the week before to reach $271 million.

Equities continued to slide last week finishing the six-week rally that saw stocks rise to their highest since March on Aug. 7. Even the publishing of better-than-expected first quarter growth figures failed to reverse the trend. Market observers still see rocky days for equities ahead.

Iranian weekdays start Saturday and end Friday. Stock markets in the country are closed on Thursday and Friday.

Tehran Stock Exchange’s benchmark index, TEDPIX, lost 310 points during the week and finished at 77,879 points. A general consensus about poor future economic performance curbed trading. Trade volume on the exchange dropped 13% compared to the prior week to $271 million.

Bond trading on the TSE also took a beating though for different reasons. Only $26 million worth of bonds were traded, down 59% from last week. Investors seldom liquidate their bond holdings due to high demand for bonds in Iran’s risky business environment, leaving much demand unmet. New issues tend to generate interest and drive trade volume up. Secondary trading is not in vogue these days.

In Iran Fara Bourse over-the-counter market sentiment was as gloomy. The market lost 1.6% during the week and closed at a two-week low of 803.75 points on Wednesday. Total trading of shares and bonds edged up 2% from the previous week to $183 million. The rise came from stocks, negating an 8% dip in bond trading to $77.3 million on Iran’s largest bond market.

  Forex Rates Stable

The rial remained stable during the week. The US dollar traded for 35,640 rials on Thursday just 140 rials lower than the start of the week. The Central Bank of Iran kept its exchange rate for most major currencies unchanged for the week. CBI sells the greenback 31,070 rials -- a 12.8% discount to its market exchange rate. A year ago difference in the two rates was 20%.

The gap between the two rates has been narrowing over the past two years. The central bank has incrementally raised its key rate continuously for the past two years. Better macroeconomic conditions and release of the bank’s assets as part of a deal to limit the scope of Tehran’s nuclear program have seemingly aided the regulator in maintaining the rial’s stability in open markets.

CBI governor has vowed to abolish the multiple exchange rate regime. The bank has recently started issuing regulations that lay the groundwork for putting an end to the subsidized forex rates. It reinstated the right to foreign exchange trading by banks at market rates this month.

There was talk of lenders being allowed to open LCs using market exchange rate. This is currently limited to LCs for industrial companies, according to Reza Aqamiri, a member of the Government and Private Sector Dialogue Council. The CBI has not confirmed this report.

Unifying the exchange rate regime is key to reviving the economy and sending a message to foreign and domestic businesses that Iran is open for trade and investment.