Seesawing between small gains and losses on Saturday, the Tehran Stock Exchange (TSE)’s main index (TEDPIX) pulled out of red territory, edging up to trigger a new series of rallies, although the TSE seems to be still grappling with its problems.
Investors and market activists saw a glimmer of hope indicating that the equity market is likely to get a boost after the Securities and Exchange Organization (SEO)’s new head announced that he would primarily focus on the current challenges faced by the listed industries like petrochemicals and refineries.
Mohammad Fetanatfard revealed his policies toward curbing further sinking of the stocks, giving a lift to the dented benchmark and also to the industries grappling with ambiguities.
Stocks swung heading to drop further, while the TEDPIX revised up at Saturday’s close, settling in green, with the free float index leading the gains.
According to TSE data, the TEDPIX ticked up 42.7 points or 0.06 percent to end at 69,537.5. The first market index rose 45.4 points or 0.09 percent to 51,001.7. The second market index inched down 7.4 points or 0.01 percent to stand at 138,240.6. The free float index was up 132.6 points or 0.16 percent to finish at 79,302.3. The industry index climbed 13.7 points or 0.02 percent to end at 58,299.3, and the blue chip index had a flat trading day to stay at 3,115.5.
As there has not yet been any strong stimulus at the equity market, it has been a while since both the volume and value of trade end the days relatively flat, registering only slight changes.
More than 664 million shares changed hands on Saturday, valued at almost 1.73 trillion rials, indicating a brief upward trend for the volume, and a brief downward for the value of trade.
Mine and Metals Development Investment Company left the most positive impact on the TSE’s gauge, while Mellat Bank and Iran Khodro stood next.
The National Iranian Copper Industries Company dramatically pushed down the benchmark, with more than 84.46 percent negative contribution. Mobile Telecommunication Company of Iran and Telecommunication Company of Iran were other crucial market laggards with 21.41, and 21.3 percent, respectively.
Prospect of Stock Market
After the stocks were rattled by overreactions on the extension of nuclear talks between Iran and the P5+1, and the global oil freefall, fears gripped investors over a potential budget deficit for 2015 with panic selloffs dominating the equity market, pushing the benchmark to hit a new record low within the past 14 months.
The weak state of the economy makes the stock market more prone to sharp nosedives, and a deteriorating situation is also expected for the listed firms at the equity market, which could lead many companies to default on their debt.
Based on these speculations, unsettled investors flock to sell off their shares in a bid to limit their losses at the equity market. The economy is suffering from a rising inflation, and some of the listed companies at the stock market may slash earnings estimates for the third and fourth quarter. However, according to market analysts, the recent dramatic plunge has been beyond initial estimates.
Thanks to analysts, emotional investing massively contributed to the broad wipeout, though the currency market and the banks offering high interest rates enticed investors to transfer their cash out of stocks.
As a result, lately, there has been a rush to safe havens out of the equity market; however, shaky investors will probably fall short of forecasting that heavily undervalued shares, those suffered their most losses, may not notch new record lows.
Furthermore, the Central Bank of Iran has announced a new approach to modifying the interest rates, banning banks and financial institutions from offering unauthorized high interest rates. This is also expected to contribute to a stock market rebound in the near future.
Besides, the administration is seeking to weed out inflation, offset the budget deficit with less dependence on oil revenues, cut its expenditures, and rely on new sources of revenue including taxes.
To conclude, selloffs will not overwhelm the equity market anymore, with stocks dramatically hitting rock-bottom value. Adding to the potential upbeat news is the government’s decision on feedstock. Petrochemicals and refineries are major players at the bourse and their performances are associated with the feedstock price. As the government is mulling over setting the price based on a long-term plan and for the next 10 years, and given the fact that these key industries can entice frontier market investors across the globe, the stock market is likely to turn into a new safe haven for both individual and institutional investors.
Analysts indicate that concrete plans put forth by the SEO and the government are expected to calm investors’ nerves, making them shore up portfolios in the near future.
