Economy, Business And Markets

TSE’s Biggest Drubbing in One Month

TSE’s Biggest Drubbing  in One Month
TSE’s Biggest Drubbing  in One Month

Stocks slipped from early trading on Saturday, extending their recent drop, as more people seek a safe haven away from the stock market instead of selling off their shares.

According to the TSE website, the market main index (TEDPIX) dipped 0.61 percent or 439.4 points to 71,486, resuming its downward trend of the past six weeks.

All market indices contributed to the decline. The free floating index slumped 0.84 percent or 678.8 points to 80,279, being the most crucial laggard in the equity market. The first market index gave up 0.83 percent or 436.7 point to 52,440.8. The second market index pulled back 0.11 percent or 162 points to 142,014. The industry index dropped more than 361.8 points or 0.59 percent to 60,559.9 and the blue chip index fell 27.8 points or 0.83 percent closing lower on the first trading day of the week.

According to the TSE, close to 324 million shares changed hands on Saturday valued at 945 billion rials.  Compared to Wednesday, the volume of shares traded at the TSE indicated a 23 percent plunge. Besides, the total trading value reached 945 billion, showing nearly a 27 percent drop.

Tehran Stock Exchange started a fresh fall on Saturday followed by uncertainty over the future of the economic outlook and the cautious approach of equity market investors over the outcome of the negotiation between Iran and the P5+1 over Iran’s nuclear program.

Today’s selloff makes sense given that investors have been councerned in the last few months that the equity market is not stable yet. Stagflation continues to reign over the national economy and due to the international sanctions, the country’s leading industries failed to get self-financing or banking loans to compensate their loss.

Given the equity market illiquidity and limited resources in the commercial banks, which is a legacy of overdue loans, the capital market is thirsty for foreign portfolio investors.

Continued poor data and gloomy outlook is becoming more apparent as the market adds to its losses, triggering fear among shaky investors as they failed to forecast anticipated earnings.

The TSE’s behavior is unsurprising as current conditions continue to play havoc with the country’s economy.  The ongoing recession weighs heavily on the nation, forcing the government to speed up its plans to push Iran out of its slump. However, this may not happen unless sanctions are lifted or the economy radically shifts.

Some investors suggest that it will not be a straight forward path. On the other hand, some analysts say that due to the administration’s drastic action to foster the economy and bolster the capital market, a shift would happen in the not too distant future.

Shaking the gloom hanging over the economy won’t be easy. Investors should be careful as they  look ahead and take long term investment into consideration instead of being shaky about daily challenges which may not affect the equity market in the long term, analysts believe.

The Rouhani administration has successfully rolled back the negative pace of economic growth and subsequently stimulated a growth rate of 0.5 percent in the first three months which ended June 21.

The most crucial challenge in the country’s capital market is lack of liquidity, which has negatively affected productivity and investors sentiment.

Since last year, the administration has been in talks with major world powers over Tehran’s nuclear energy program, an issue which has been damaging to the economy as a whole. Soon after last year’s interim agreement between Iran and the P5+1, the Iranian capital market surged to a new high though it later reversed down.