The Tehran Stock Exchange (TSE)'s main index notched its fourth consecutive drop, as the indices slumped to drag down the market benchmark and pushing investors further to the edge.
The unprecedented hike in foreign currencies triggered investors' fears, enticing them to counterbalancing their chance of loss with multiple bets, lining to sell-off shares, and at the same time mulling over investing in a rival market.
The fluctuations at the value of foreign exchange market have been always a crucial laggard to the equity market. The recent surge in foreign currencies, or rial's depreciation in better words, is associated with the freefall in oil price.
Rial's sharp drop is obviously a negative economic indicator, triggering hyperinflation, and thus increasing the government's expenses, Keivan Sheikhi, head of the information and statistics department of the TSE told the Financial Tribune. "The equity market is prone to dramatic falls once the foreign exchange market loses stability," he asserted.
Market analysts are estimating that Iran's economy is likely to struggle under falling oil prices after the Organization of Petroleum Exporting Countries (OPEC) decided Thursday to keep its current production level. Moreover, considering the western sanctions against Iran over its nuclear energy program, the administration would encounter a potential budget deficit next year, if not in the remaining months of this year. This is expected to make the economy susceptible to shocks in the long-run, analysts believe.
According to the TSE data, the benchmark has set out a broad retreat since November 25, closing four straight trading days in red. In its fresh downfall on Sunday, the TEDPIX dramatically pulled back by a 1,055.6 points or 1.44 percent to record one of the gloomiest trading days within the past 8 months.
The first market index dipped 850.6 points or 1.57 percent to settle at 72,189.5. The second market index tumbled 1,596.9 or 1.12 percent to end at 141,205.1. The free float index extended its losses and fell 1,434 points or 1.7 percent to stand at 82,978.5. The industry index dropped 757.7 points or 1.24 percent to 60,495.6 and the blue chip index 60.4 plummeted 60.4 points or 1.83 percent to finish at 3,247.5.
>>>>Nervous Selloffs Continue
Investors' behavior weighed on the fragile atmosphere at the TSE, as they lined up to get rid of shares in a bit to take their money out of the stock market.
The trade volume and value explicitly demonstrated the unsettled investors' sentiment, as investors were mulling over snapping up the chance to gain from the foreign currency fluctuations instead of losing outright at the equity market.
Furthermore, a group of individual and institutional investors preferred to stay away from trading at such a volatile market till the stability comes back to the stock exchange.
More than 517 million shares changed hands during a downward Sunday, valued at almost 1.5 trillion rials, indicating more than 50 percent decline both in terms of volume and value.
Persian Gulf Petrochemical Industry Company heavily weighed on the TEDPIX. Mobarakeh Steel Company, and Parsian Oil and Gas Development Company were other laggards to the TSE's gauge.
Criticisms are already arising over the efficiency of the responsible entities of the capital market, as they have failed to manage the crisis, with selling-off lines dominating four consecutive trading days.
Market Development Fund is the equity market regulator, mediating the trades in order to help the TSE back on track. But as market analysts believe, the fund has so far failed to put a halt to the TEDPIX's broad retreats.
Market Development Fund's capital is almost 6 trillion rials, an amount which has been supplied by banks (50 percent), capital market entities (30 percent) and insurances (20 percent), said Amin Azarian, a young market analyst, to the Financial Tribune, adding that the fund plays a key regulating role when the stress is reining over the equity market.
The combination of rial depreciation and the falling oil price may trigger a stock market meltdown in Iran, but according to the listed companies' semi-annual reports and some official statements, the equity market's negative sentiment is expected to gradually fade out.
"Principal factors affecting supply and demand exist in the market, so the situation will surely go back to normal," the governor of the Central Bank of Iran, Valiollah Seif, claimed Sunday as agitation overrode both the stock market and the foreign exchange trading.
