TEDPIX, IFX Hover at All-Time High

Tehran Stock Exchange’s main index TEDPIX added 1,813 points or 2% during the week that ended on Nov. 29 to end at 91,152.2.

The main index of the smaller over-the-counter exchange Iran Fara Bourse gained 13.4 points or 1.3% during the week to stand at 1,030.5.

TEDPIX gained 1130.40 points or 1.27% to end Saturday trading at an all-time high of 90,469.5. The previous high of 89,500 was reached by TEDPIX back in January 5, 2014. The daily growth was the highest in 13 months.

Mehdi Farivar, portfolio manager at Griffon Capital, told Financial Tribune on phone that the growth followed a logical pattern since the beginning of this fiscal year.

"The index has grown about 2% during the past two months to reach this level from 84,600. This movement primarily started with two major developments, namely dropping deposit interest rates and the listed companies' promising performance in H1," he said.

Farivar added that beyond the fundamental factors, the growth is being further supported by improving global conditions for miners and metal producers, as well as petrochemical producers.

He believes the prospects of further growth is undeterred in line with improving economic indicators, such as increasing currency devaluation, rising oil prices, sustaining commodity prices at their current levels and continuation of interest rate drops, which would increase the flow of money to the market.

However, Ali Nikoogoftar, a senior market analyst at Bazar Saham Brokerage, told us that the Saturday upsurge was a result of “unprofessional trade” by inexperienced traders and cannot be counted upon to last.

“I’m concerned about [the bust] after this [boom]. A professional trader would buy on a real basis and keep the share for a few months at least. But an inexperienced trader would turn to selling fast and things will go south,” he said.

The main index of Fara Bourse is also at its all-time high.

Trading at Iran’s stock markets starts on Saturday and ends on Wednesday.

Over 5.27 billion shares valued at $263.09 million were traded on TSE during last week. The number of traded shares and trade value rose by 31% and 8.7% respectively compared to the previous week.

TSE’s First Market Index gained 1,896 points or 3% to end at 64,956.2.

The Second Market Index rose by 647 points or 0.34% to close at 193,007.4.

At IFB, more than 1.4 billion securities valued at $175.51 million were traded. The number of traded shares grew by 18% while trade value dropped by 25% compared to the week before.

IFB’s market cap gained $180.75 million or 0.6% to reach $28.96 billion.

Its First Market witnessed the trading of 322 million securities valued at $14.3 million, indicating a 9% and 31% drop in the number of traded securities and trade value respectively.

About 463 million securities valued at $31.19 million were traded in the Second Market, with the number of traded securities and trade value rising by 49% and 6% week-on-week respectively.

> Dispelling a Myth

The stock market’s unexpectedly good performance of late has grabbed the headlines. Traders and policymakers unanimously applaud the direction the market is treading and are calling for measures to keep it that way.

They expect the government to play an active role in sustaining the growth by channeling new money from other markets, assuming that all listed industries’ shares are buoyed in the process.

Interestingly, nearly all the above expectations seem to run contrary to the very nature of stock trading and could potentially hamper the current market boom, the Persian economic daily Donya-e-Eqtesad reported.

Tehran Stock Exchange’s benchmark index recorded its highest daily growth in 13 months on Nov. 26, breaking past its all-time high by jumping beyond the 90,000 mark.

The smaller over-the-counter market, Iran Fara Bourse, is also currently hovering around its highest level of 1,000.

The new high reached in the capital market was the subject of a roundtable attended by market analysts and SEO officials recently aired on national television.

The attendants predominantly focused on finding a way to push for “sustained growth” in the market and ways to keep up TEDPIX’s upsurge.

This is while the capital market intrinsically defies any notion of sustaining a certain trend.

Donya-e-Eqtesad believes growth cannot be sustained, since the market is bound to fluctuate at some point and correct its gains.

That said, it is arguable to speak of a sustainable boom in the market, the signs of which are already showing: a growing market capitalization and increased price-to-earnings ratio.

What market regulators can do is to sustain the market’s bullish sentiment by increasing the number of initial public offerings and removing the base volume and price fluctuation limitations. This may not necessarily lead to TEDPIX’s growth, but will progressively increase the amount of capital available in the market and pave the way for a thriving market.

Moreover, policymakers can introduce new instruments such as derivatives and options to sustain investors’ interest in the market even during bust periods.

At the same time, it has to be considered that a boom period will not necessarily buoy all industries’ shares in its upsurge. At TSE, for instance, 20 industries have posted upswings so far in the current fiscal year (March 21, 2017-18) while 15 others have been constantly dropping. This is while TEDPIX has gained about 17% during the period.

Lack of a homogeneous uptrend for all industries is in fact a good sign. It means that the recent market jump was not a mere psychological push over a liquidity increase, but a fundamental growth backed by a sustainable boom.

There’s currently a consensus among most local analysts and policymakers that the government should intervene in the market to help sustain the prices’ growth. The primary help they expect appears to be the channeling of new money from other sectors, such as the money market to equities.

The pros and cons of a free and state-controlled market can be up for debate, but experience has shown that the government’s meddling in the capital market has not been very effective. As a case in point, in 2014, the government pushed state-owned banks to inject about 50 trillion rials ($1.21 billion) into equities. The ensuing growth was only short-lived and soon gave away to a prevailing recession.

Instead of enforcing policies, the government should streamline the ones currently in place. Privatization should be real and transparency must be fostered, and these can hardly happen when the government is calling the shots in most sectors.

Petrochemical producers are a good example. Their shares have been gaining for quite some time now, but lack of transparency in their feedstock pricing by the government is preventing them from publishing their required balance sheets, raising investment risks despite the improving global prices’ condition.

In short, the force sustaining the market must remain as invisible as possible, or the government’s heavy hand could potentially impede the current favorable condition, Donya-e-Eqtesad concluded.