Tehran Stock Exchange continues to go through its fresh bearish trend amid the oil price freefall. Yet again, investors' overreaction drastically dragged down the benchmark at Sunday's close.
It has been a while since the TSE started witnessing a new downtrend, first in November when Iran and the P5+1 decided to extend their nuclear talks for another seven months, and additionally after the unprecedented plunge in oil prices.
It should be noted that investors' reactionary manner has dramatically contributed to the continuation of negative trading days, pushing the TSE's gauge to hit this year's record low.
Week's first trading day was accompanied by a broad wipeout at the equity market, where the TEDPIX notched a record low within the past 12 months.
There's a correlation between the oil price fluctuations and the economic uncertainties, and also with the performance of the listed firms, said Amir Mohammad Khadivi, director of stock-trading at Tadbirgar Sarmayeh Brokrage Company to the Financial Tribune on Sunday. "The TSE's trend is heavily reliant on the crude oil prices," he said, adding that "unsettled investors have partly moved their cash to the gold coin futures, as recent fluctuations at Iran's gold market has brought more profits for the investors."
Investors lined up for gold coin futures on Sunday, with prices fluctuating till late in the afternoon. The foreign currency market has been witnessing dizzying price swings, mostly due to the gloomy prospect for the economy.
Remarking on the impact of investors' behavior on the benchmark, Khadivi emphasized that part of investors have come to a conclusion for trading at the equity market based on flimsy information and emotional reactions.
Speaking about key contributors to the benchmark's ups and downs, he pointed out that the government shall consider the regional feedstock prices when it comes to setting price for petrochemical and refineries' feedstock.
Feedstock prices can stimulate foreign investments in Iran's petrochemical sector. Given the speculations regarding the production capacity of extra 70,000 cubic gas, petrochemical sector should be reinvigorated enough to be capable of using the feedstock to help the country create valued added assets, Khadivi said.
Considering the potential budget deficit, the administration should offset the loss through spotting new revenue resources. One of the key sectors, undoubtedly, is the petrochemical sector. To entice investors to snap the chance of investing in a frontier market, having a reasonable price for feedstock is obligatory. Clinching a final nuclear accord with the West is, however, essential to pave the way for attracting institutional investors to come and invest here.
Khadivi also highlighted that foreign investors tend to get ownership of commodities of the petrochemical complex they pour their cash in. Hence, it is more likely to see petrochemicals turn into a safe haven in the stock market in the near future, presuming that the administration manages to lure investors with attractive incentives.
TEDPIX Hits Record Low
The TSE's overall index nosedived at Sunday's close, and notched its record low within the past 12 months, with the benchmark erasing 751.4 points or 1.06 percent to settle at 70,291.6.
According to TSE data, all indices heavily lost on persisting ambiguities over the prospect of the economy amid the ongoing concerns on oil, feedstock prices, bank interest rate, and a potential budget deficit.
The first market index tanked 691.6 points or 1.32 percent to end at 51,622. The second market index was down 570.8 points or 0.41 percent to 139,297.2. The free float index tumbled 1,085.6 points or 1.33 percent to stand at 80,326.7. The industry index dipped 529.5 points or 0.89 percent to finish at 58,992.3, and the blue chip index slipped 47.4 points or 1.48 percent to extend losses, standing at 3,158.6.
More than 5.6 million shares were traded at the equity market on Sunday, valued at almost 1.5 trillion rials. While trade volume dropped slightly, trade value was up a bit compared to the previous trading day (Wednesday).
Ghadir Investment Company had the most negative impact on the benchmark. MAPNA and Mobarakeh Steel Company were the other firms that heavily weighed on the TEDPIX.
