Investor's overreactions calmed on Monday at the Tehran Stock Exchange (TSE) with the overall index rallying at its best since November 8, after market activists digested the dovish policy of the newly appointed chairman of the Securities and Exchange Organization.
After broad wipeout within the past one month, traders enjoyed a good day, as the TEDPIX scored its best one-day gain, notching 70,000-mark at Monday's close. Mohammad Fetanatfard, the new SEO chairman, just last week that his core policy is aimed at tackling the listed industries' challenges.
The recent controversial lineups to get rid of shares have been triggered by global slump in the prices of crude oil and minerals, as well as speculations over a potential budget deficit in the next Iranian fiscal year. However, according to analysts, the sharp falls of the TEDPIX, which even nosedived below the key 70,000 resistance level, spurred concerns among officials.
Monday's trade demonstrated that the bearish trend may not persist for long, though the limping economy may affect the expected earnings of the listed firms at the equity market.
It is hard to disregard the cloudy atmosphere of the economy, which has cast doubt over positive speculations over economic growth in the long-run. However, the administration has introduced policies to offset the potential budget deficit through other sources of revenue.
Indices End in Green
According to TSE data, the benchmark was poised to resume its uptrend from early Monday morning, as all indices made positive contribution to help the TSE's gauge pull out of red territory.
The TEDPIX extended its gains from Saturday, rising 556.9 points or 0.8 percent to settle at 70,094.4, with investors shrugging off the ongoing ambiguities pertaining to a potential budget deficit and a subsequent recession.
The first market index gained 472.9 points or 0.93 percent to 51,474.6. The second market index pulled higher 683.3 points or 0.49 percent to stand at 138,923.3. The free float index surge 853.7 points or 1.08 percent to lead the gains, finishing the day at 80,156. The industry index climbed 388.3 points or 0.67 percent to end at 58,687.6, and the blue chip index turned higher 27.1 points or 0.87 percent to 3,142.6.
Monday's uptrend was marked by a 10 percent hike in the volume of trade, as well as a 7.33 percent growth in the value of trade with more than 731 million shares changing hands, valued at 1.85 trillion rials.
The Mine and Metals Development Investment Company topped the volume of trade with more than 31 percent positive contribution to the benchmark. Sepahan Cement Company and Mellat Bank stood next in terms of the volume of trade.
Mellat Bank had the most positive contribution to push the TEDPIX to the green territory, while Tamin Petroleum & Petrochemical Investment Company were other positive contributors to the TSE's gauge.
New TSE Speculations
Once skittish investors spotted the glimmer of hope offered by the SEO and administration's new approach toward the equity market, the bourse witnessed the return of investors aiming to garner undervalued shares. This regular reactionary manner is expected to dominate the equity market at least for a while.
Given the estimates, the possibility of breathtaking rallies in the near future remains shrouded in ambiguity, although the administration's stimulus is likely to give a boost to the equity market and shift the sentiment upward.
Adding to the positive speculations is the onus of feedstock price discovery, which is left to the administration itself. Beyond doubt, the government may have no option but to unveil a practical long-term policy to help attract direct foreign investment in Iran, guarantee the sales of petrochemical commodities, and reinvigorate local industries that rely on feedstock for production.
Some industries are in danger due to the dramatic oil plunge. These include the petrochemical industry, which is a strong lever at the equity market. Panic selloffs of petrochemicals' shares have been evident during the past few weeks, mainly due to the speculations over the companies' probable cuts in earnings. Besides, polymer prices started to tumble at the Iran Mercantile Exchange (IME) on Monday. However, cheap feedstock, along with more export is likely to compensate losses to some extent.
To conclude, the stock market may not record big gains anytime soon, let alone reaching its previous record highs in the near future; however, the TSE roller coaster may not result in further nosedives unless the market falls victim to an unexpected laggard.
