Stocks in Iran’s equity market posted another massive wipeout, and lost ground during the week that ended December 31, after the overall index lost 1,180 points to lose grip on the 69,000-point mark, TSE data shows.
Gains at the Tehran Stock Exchange (TSE) kept evaporating over the period, with the gloomy atmosphere of the equity market curbing enthusiasm among investors to garner undervalued shares.
The TSE’s gauge dramatically tumbled 1,180 points or almost 1.7 percent to record a new record low within the past 14 months and settle at 68,973.
The first market index slipped 669 points or 1.3 percent to end at 50,917. The second market index gained 341 points but it recorded a 2.63 decline compared with the previous week.
More than 2.3 billion shares changed hands, valued close to 6.8 trillion rials, recording a 52 and a 35.8 percent decline in trade volume and value respectively.
Overall, the TSE wrapped up the week mostly in red, with key benchmarks registering losses over persistent concerns.
Diminishing Expectations
Investors at the stock market have been spooked after a series of dramatic nosedives by the TEDPIX since November 12. According to market analysts, the extension of nuclear talks (which eroded optimism among investors), ambiguities regarding the next fiscal year’s budget, and the falling crude prices are three main challenges blamed for the current gloom prevailing in the economy.
The global slowdown, slump in the minerals market, and foreign currencies fluctuations (which may in turn trigger higher inflation), are among the other challenges that are pushing investors on the edge. In addition, high banking interest rates as a result of the country’s inflation, lack of liquidity, and speculations over the refining sector have contributed to the benchmark retreat within the past few weeks.
In an attempt to reassure the investors, Mohammad Fetanatfard, the newly-appointed chairman of the Securities and Exchange Organization (SEO) has recently said that both the SEO and the administration are determined to tackle the stock market challenges. Nonetheless, investors have been flocking to rival markets.
Iran is suffering from galloping inflation. Adding to the stressors, recession has been reigning over an array of sectors. The imminent budget shortfall due to the falling oil prices is set to dramatically slow down economic growth and diminish expectations over the TSE’s sentiment shift in the near future.
Psychology of Investing
Shaky investors are likely to be influenced by market jitters mostly in times of stress, when unofficial information is overwhelming. As the economy has been buoyed by spending cuts and new source of revenues, listed firms’ poor data or brokers may mislead investors. When it comes to money and investing, we do not always behave rationally. Investors become optimistic when the market goes up, assuming it will continue to do so. Conversely, they become extremely pessimistic during downturns. Hence investors ought to take into consideration the companies’ performances in the long run while bearing in mind all the contributing factors.
Benchmark Sentiment
The TEDPIX, trade value and the average Price Earnings ratio (P/E) registered 12, 17 and 24 percent nosedives within the first nine months of the year, which ended December 21, boursepress reported.
Investors have been always urged to garner rock-bottom shares with the lowest P/Es; however, that is not always the case. Macro economy indicators, contributing factors to the listed firms’ performance including oil prices, fluctuation of raw materials, the global slowdown, and western sanctions over Iran’s nuclear program should all be carefully taken into account.
Oil fell in 2014 by the most since the 2008 global financial crisis as US producers and the Organization of Petroleum Exporting Countries (OPEC) ceded no ground in their battle for market share amid a supply glut. The oil slump squeezed the economy and projected an imminent budget deficit. Considering the fact that Iran’s economy is oil-based, a major positive shift in the equity market’s sentiment is not estimated in the short run.
In conclusion, the TSE is currently wobbling amid escalating ambiguities faced by the investors. If the government and bodies like the Stock Market Development Fund fail to give a boost to the equity market, the TSE’s gauge will keep tumbling.
