Bears continued their reign over equity markets in Tehran, driving all major stock indices lower for the week. All major industries faced losses for the week while liquidity dried up even more than before.
Poor economic outlook and speculation about the return of double-digit inflation, combined with the crisis in banking and manufacturing sectors, are sapping share prices.
Meanwhile, escalating tensions with the United States Navy in the Persian Gulf have added an element of political risk to calculations. These tensions have undermined hopes of convincing the US to ease some of its non-nuclear sanctions against Iran. These sanctions, coupled with lax anti-money laundering regimen of Iranian Banks, are sabotaging dealings between Iranian banks and their international counterparts and, as a result, keeping foreign investment in Iran at a minimum.
Tehran Stock Exchange’s benchmark ended the week down 0.3% at 76,455.40 points, just off a seven-week low. This was the fifth straight week of losses for the TEDPIX. Trade volume, which had hit its lowest in nine months last week, dropped a further 23.8% for the week.
> Stock Trading Halved on IFB
Things were no better on Iran Fara Bourse over-the-counter market where stock trading halved as buyers fled the market.
The market’s main index sank 0.3% and closed at 799.97 points on Wednesday. The IFX has fallen for three straight weeks.
A surge in bond trading brought the market’s total trade volume up 14% to 4.6 trillion rials from the prior week, negating the effects of the sharp drop in equity trading. Bond trading soared 80%, to 2.2 trillion rials for the week.
Construction companies were the most traded group on the IFB this week. Fifteen percent of trading were in construction stocks that only constituted 2% of the market. Conversely, the market’s largest group—chemical producers—that dominates trading, was only the eighth most traded group with just 4% of trading. The group makes up over a fifth of the market.
The US dollar stayed unchanged at 35,800 rials. The greenback’s exchange rate against the rial has risen steadily for the past seven months. The US currency has tested the 35,850-rial resistance level continuously for the past three weeks.
Bells and Whistles
The chief executive of the Central Securities Depository of Iran and the Securities and Exchange Organization’s deputy for foreign investment used the gloomy week as an opportunity to travel to Athens to talk of boosting bilateral ties. The two ceremonially rang ATHEXCSD’s opening bell.
The chief executive of Iran Mercantile Exchange said the SEO is working on a revision of Iran’s financial markets law that was passed a decade ago in a letter published by Securities and Exchange News Agency. It is uncertain when these intentions will turn into action, however.
While investors selling shares on the rare occasion of finding buyers, demand for fixed-income securities is high, especially among institutional investors. This comes mainly from a shortage of bond offerings and attractive rates on them.
Capitalizing on this demand, the government started the three-day offering of Salaf contracts for wheat on Wednesday on Iran Mercantile Exchange to finance its wheat purchase from farmers this year. The three-day offering will resume on Saturday.
Salaf is an Islamic security similar to futures contracts used to forward sell an underlying commodity with a predetermined interest for the period.
Government Trading Corporation of Iran is offering 32 million wheat Salaf contracts hoping to raise 26.5 trillion rials ($745.2 million at market exchange rate) from the sale. The company will use the money to buy wheat from farmers under its guaranteed purchase scheme.
