The new management of the Securities and Exchange Organization has provided a 5-year comprehensive plan to transform Iran's bank-based financial system into a market-based system – with special focus on the equity markets. "We need to make the stock market more attractive to convince investors to head back to the equity market from the currently bustling currency market," SEO's new chief said Saturday.
The administration should have an appropriate policy with regard to financial institutions, said Mohammad Fetanatfard, adding that practical collaboration between banks and the equity market will help accelerate economic growth.
Fetanatfard further cited that both the administration and the relevant bodies have shifted their focus to the TSE, in a bid to tackle the current challenges and push the equity market's dented sentiment to the positive territory.
"Appropriate measures have been taken to improve the situation at the stock market, for instance by launching new securities at the first market," Fetanatfard said.
In a bid to help the economy out of recession, more than 2,600 trillion rials have been paid by banks to finance major projects across the country, while the equity market's contribution was less than 10 percent, said Fetanatfard, adding that "adopting new regulations aimed at smoothing the money supply through the stock market is inevitable."
Fetanatfard underlined that diversifying financial instruments may help bring stability back to the stock market through hindering the unprecedented fluctuations at the secondary market.
"It has been almost a year that the stock market has been witnessing a persistent downtrend, accompanied by a 40 percent decline in the volume of trade, as well as 20 percent drop in the overall index," said Fetanatfard, adding that listed companies' Earnings Per Share (EPS) has posted 18 percent growth compared to the last year.
Addressing the recent nosedive at the equity market, Fetanatfard named systematic risks and the shaky sentiment of investors as the stock market's main laggards.
The new SEO chief said that he expects the equity market to register an uptrend in the coming months.
Interaction With Int'l Financial Firms
Iran's capital market is gearing up to interact with international financial institutions in a bid to accelerate attraction of foreign investment, IRNA quoted Ali Tayebnia, the minister of economic affairs and finance, on Saturday.
Tayebnia made the remarks at Fetanatfard's inauguration ceremony. The minister emphasized that US-led sanctions are not permanent, adding that "these sanctions won't have a lasting impact on Iran's economy, and will be lifted sooner or later."
Iranian financial institutions have already started negotiating with frontier market investors, financial institutions overseas, etc., preparing the ground for the time sanctions are lifted, market analysts believe.
According to the Financial Tribune analysis, Iranian financial institutions have sped up the process so that foreign investors are persuaded to bring cash to Iran's equity market.
Tayebnia further reiterated that financial instruments and institutions are not sufficiently developed yet. Regulating investors' behavior at the equity market is said to be another crucial factor, which is correlated to the Tehran Stock Exchange (TSE)'s sentiment.
"Financial markets are globally tasked with supplying money for industrial projects with high feasibility", said Tayebnia, adding that "financial institutions have a key role in the national economy."
Speaking about the high rate of liquidity growth in Iran, Tayebnia cited that this growth is due to the increase in monetary base by the Central Bank of Iran (CBI), as well as other external factors, while a jump in the amount of liquidity in developed countries is associated with the multiplier effect.
"Financial markets consist of capital market, money market, and foreign financing," said Tayebnia, adding that according to the administration's approach, the mission of Iran's capital market is to provide cash for industry in the long-run. Banks are also tasked with providing cash flow for industrial units.
Based on a plan approved by the government earlier this year, almost 60 percent of loans will be dedicated to provide cash flow for the firms. With attribution to the latest statistics for the first seven months of the current year (March 21-October 22), nearly 60 percent of loans went to the firms in a bid to bolster the economy as a secondary result.
The minister said that due to the recently reported 4 percent economic growth for this year, it is evident that the economy is back on track, adding that further growth is expected in the medium term.
