Banks’ Return Continue to Play Havoc With TSE

Tehran Stock Exchange’s benchmark index TEDPIX gave up 634 points or 0.8% for the week that ended February 1 to close at 77, 415.

Iranian weekdays start Saturday and end on Friday. Both of Tehran’s stock exchanges TSE and IFB are closed on Thursday and Friday. 

TEDPIX appeared phlegmatic for most of the week and steadily reached close to breaking the 78,000 resistance level on Tuesday. However, Bank Tejarat’s return to trading on Wednesday heavily contributed to TEDPIX’s 0.75% plunge and its sinking to a four-month low.

In contrast, the over-the-counter Iran Fara Bourse made good gains this week. The benchmark added 12.3 points or 1.5% to end at 849.6. The IFX had tumbled about 1% the week before.

   2 Banks Return, 2 More to Go

After a volatile performance from March to July, TSE’s Banking Index maintained a slow but steady decline throughout 2016. 

The downtrend was exacerbated on January 24 as Bank Mellat’s ticker symbol was unfrozen after a near seven-month hiatus and resumed trading, leading to a massive 9.6% drop for the index.

The next shock came last week as Tejarat Bank’s shares were reopened for trading with no set cap. Consequently the Banking Index gave up 4.87%. The large-cap bank’s shares dropped 33.76% to 665 rials per share.

The trading symbols of Mellat and Tejarat were frozen since July by the Central Bank of Iran and the Securities and Exchange Organization. Such has also been the case with Post Bank and Bank Saderat Iran whose ticker symbols have yet to reopen for trading.

For years, these banks were giving out dividends that had no real financial backing, since they were using unpaid loans and debts in their profit calculations. In order to put an end to this practice, the banks were mandated to prepare their financial statements based on International Financial Reporting Standards before being allowed to hold shareholder meetings.

IFRS is a single set of accounting standards, developed and maintained by the International Accounting Standards Board. These standards are now mandated for use by more than 100 countries, including the European Union and by more than two-thirds of the G20 states.

  IFRS Strictures

“Enacting IFRS is one of the main requirements for the listing of Iranian firms on foreign stock exchanges and a subsequent attraction of foreign capital,” the head of Iran Audit Organization said.

Ali Akbar Soheilipour added that local companies’ lack of transparency in accounting has caused foreign investors to shy away from the country.

It all began after news surfaced that Bank Saderat, one of the biggest banks privatized in recent years, had incurred huge losses in the first half of the current fiscal year (March 21-September 21). Soon, it became known that Saderat was only one among many lenders whose new balance sheets had sunk in red ink.

Market experts expect Bank Saderat and Post Bank’s return to send shockwaves in the market similar to what happened in the past two weeks.

According to Ali Khosroshahi, Amin Investment Bank’s senior asset management and investment analyst, CBI and SEO are treading a wrong path by waiting to relist each bank’s shares.

“Keeping the investors waiting for months was wrong in the first place and now the gap between banks’ trade resumption is making it even worse. If not in a single day, they can at least make it happen in a single week,” he told the Financial Tribune.

The CBI and SEO are attempting to keep the market in order, as the banks’ return to trading are unlikely to be effective. The market analyst noted that this will only cause more uncertainty for investors as we approach the new fiscal year.

  Weekly Report

Over 5.75 billion shares valued at $249.3 million were traded on TSE during the past week. The number of traded shares and weekly trade value grew by 31% and 9% respectively compared to the previous week.

TSE’s First Market Index shed 482 points or 0.9% to end at 54,772. 

The Second Market Index lost 1,168 points or 0.70% to close at 165,745.

At IFB, more than 895 million securities valued at $210.9 million were traded in 116,000 transactions. The number of traded shares dropped by 18% while weekly trade value edged up by 1% compared to the previous week.

IFB’s market cap gained $1.18 billion or 4.6% to reach $26.8 billion. Its First Market witnessed the trading of 158 million securities valued at $7.15 million, indicating a 19% and 18% rise in the number of traded securities and trade value respectively.

About 343 million securities valued at $35.18 million were traded in the Second Market, with the number of traded securities’ trade value dropping 30% and 24% respectively week-on-week.

The ‘industrial contractors’ group of IFB-listed industries had the highest weekly rise in share value (21%). ‘Food and beverages other than sugar ‘(14%) and ‘metal products manufacture’ (9%) came next.