Economy, Business And Markets

Stocks Pull Back Amid Shaky Ground

Stocks Pull Back  Amid Shaky GroundStocks Pull Back  Amid Shaky Ground

All indices settled in red once again, and pushed the Tehran Stock Exchange (TSE)’s benchmark to notch down by 0.11 percent in a seesaw session at Tuesday’s close, after the Monday’s rally snapped TSE’s longest losing streak.

As the uncertainties linger in the equity market, and with the ongoing oil price slump squeezing the budget, the TEDPIX retreated and wiped out parts of Mondays’ gains.

According to TSE’s data, stocks lost further ground in the face of escalating fears and slipped after morning rally, with the TEDPIX inching down 71.8 points or 0.11 percent to stand at 65,928.3.

The first market index edged down 31.9 points or 0.07 percent to end at 48,923.1. The second market index was down 278.7 points or 0.22 percent to 127,320.3. The free float index ticked down 20.3 points or 0.03 percent to settle at 75,382.5. The industry index dropped 70.8 points or 0.13 percent to finish at 55,327.3, and the blue chip index lost 2.7 points or 0.09 percent to 2,968.4.

Despite the day’s downward trend, trade volume and value recorded approximately 50 and 20 percent growth respectively compared with Monday’s trade. More than 544 million shares changed hands, valued at almost 1 trillion rials.

Pars Khodro, Mellat Bank and Saderat Bank had the most volume of trade, with Pars khodro alone managing to help the TEDPIX with almost 3.4 points positive contribution.

Mellat Bank also recorded the highest trade value among other listed companies at the TSE. In addition, Mobile Telecommunication Company of Iran (MTCI), and Persian Gulf Petrochemical Industry Company (PGPIC) took the second and third places respectively, though only MTCI managed to settle in green.

The TEDPIX was helped by the MTCI, Mapna Group and Iran Khodro with nearly 28, 26 and 19 points positive contributions respectively.

The PGPIC, having been known since quite some time as the most notorious market laggard, dragged down the benchmark with almost 57-point negative contribution.  The National Iranian Copper Industries Company and Saderat Bank were the other market laggards at Tuesday’s trading.

With bearish sentiment dominating the equity market since November 12, the TEDPIX lost almost 6.8 percent within its longest 12-day losing streak, which started on December 27 and was capped on January 12.

The stock market corrections in the past few weeks have already caused new record lows while the market is also expected to witness changes arising from the new government promises. But few, if any, foresee anything but volatility ahead.

After the ratification of the Financial Stability Fund by the parliament and the administration’s vow to revive the equity market, the TSE recorded a positive trading day on Monday; however, Tuesday’s downtrend underscored the fragile atmosphere at the stock market.

 Financial Stability Fund

The TSE’s unprecedented nosedive forced the authorities to consider creating a new financial institution to help the equity market in critical situations and prevent persistent bearish trend to dominate the stocks.

The decision, which was arrived at following intensive talks between the Securities and Exchange Organization, the cabinet ministers and other associated entities, was ratified by the parliament on Monday.

Some analysts indicate that the newly established fund could act as leverage and help the equity market in tough times when its listed industries are threatened.

Backed by the law and supported by specified entities and leading financial institutions, the Financial Stability Fund (FSF), which enjoys substantial financial resources, will play a key role when gloom over the equity market looms large, said Hossein Khezli Kharazi, CEO of Noor-e-Anvar Financial Holding in Tehran to SENA.

“The Central Bank of Iran (CBI) is a member of FSF’s board of trustees, which is expected to play a key role in times of stress,” said Khezli Kharazi.

Despite the fact that the FSF is expected to give a boost to the equity market, the limping economy, faced with plunging oil prices and a possible budget deficit, has slashed expectations over economic prosperity in the mid-run. Hence, the overall outlook is still gloomy.

The government has adopted effective measures to slow down the liquidity surge by contracting the supply of money; however, speculations over the next fiscal year budget indicate that the expected losses of revenue in the proposed budget may force the government to expand the money supply.