Economy, Business And Markets

Stock Market Unnerved by Prevailing Ambiguities

Stock Market Unnerved by Prevailing AmbiguitiesStock Market Unnerved by Prevailing Ambiguities

Fragile atmosphere still reigns over the Tehran Stock Exchange (TSE), with the benchmark tanking almost 1.4 percent in the week that ended January 14 to settle at 65,000 point.

The week’s first two working days were accompanied by panicked selloffs and massive overall index retreat; however mid-week rally on Monday snapped the longest 12-day losing streak. But the TSE failed to cling to its one day uptrend and tumbled again subsequently.

The equity market was spurred on by positive news within the week’s last trading days, as the parliament ratified the Financial Stability Committee (FSC). Moreover, the Guardian Council’s approval of a key regulation regarding pricing the petrochemical feedstock triggered lineups for listed petrochemical complexes, which altered dented sentiment of the sector as a result of the oil slump.

The upbeat news over petrochemicals sector and the government’s pledge to revive the equity market through various measures including the FSC, couldn’t dramatically change the TSE’s sentiment, but it managed to calm down the investors to some extent.

According to TSE data, the TSE’s gauge kept tumbling as it slipped 936 points or 1.44 percent over the past week. The TEDPIX has nosedived almost 16.5 percent since the beginning of the current Iranian year, which ends March 21.

The first market index plunged 744 points or 1.5 percent to stand at 48,874.3. The second market index dropped 1,666 points or 1.29 percent to 127,714. The free float index tumbled 1,344 points or 1.45 percent to end a downbeat trading at 75,310.2. The industry index shed 737 point or 1.31 percent to settle at 55,365.6. The blue chip index also fell 47 points or 1.56 percent to close the week at 2,969.9, and the financial index plummeted 2,777 points or 2.16 percent to dramatically keep retreating to 125,933.9.

All TSE indices have heavily fallen down since the beginning of the current Iranian year, with the financial index leading the losses with almost 20 percent slump. The other indices have also dipped by more than 15 percent each.

More than 2.38 billion shares changed hand in sloppy trades, valued at almost 4.9 trillion rials. Trade volume and value registered more than 7.5 and 31 percent decline respectively in comparison with the previous trading week.

TSE’s data also indicate that the majority of the listed industries posted negative results during the period, with the mining and print and publication sectors topping the downbeat performances.

While only about 40 percent of the listed industries at the equity market are directly related with oil, overreactions to the current tumbling oil price triggered massive selloffs for almost all shares in the stock market.

Market analysts believe that part of the persistent bearish trend at the TSE is due to the shaky sentiments of both individual and institutional investors, which heavily dragged downed the TEDPIX.

Reviewing the performance of most listed companies, the impact of recent positive steps to help the equity market get back on track is evident in the overall index trend to some extent.

 Feedstock Price

Clarification on feedstock pricing is expected to give a boost to the petrochemical companies’ performance. Feedstock’s competitive price will entice frontier market investors to pour money into the so far untapped markets.

It should be noted that western sanctions are still the biggest deterrent against this giant industry in Iran. Transferring payments for sales and securing insurance for exports remain the biggest hindrances for petrochemical producers, Mohammad-Hasan Peyvandi, Vice President of Iran’s National Petrochemical Company believes.

Positive expectations for arriving at a comprehensive accord in the upcoming meeting between Iran and the P5+1 ( the five permanent members of the UN Security Council, plus Germany) is portraying a bright outlook for the sector.

 Treasury Stocks & FSC

Apart from ratifying of the FSC, which is expected to increase the liquidity at the stock market, the parliament also amended a law to permit the listed companies buy ‘treasury shares’.

Treasury shares are portions of the shares that a company keeps in its own treasury. Treasury stock may have come from a repurchase or buyback from shareholders; or they may have never been issued to the public in the first place. These shares don’t pay dividends, have no voting rights, and should not be included in the shares outstanding calculations.

Allowing the companies to buy back 10 percent of their own stocks helps support the shareholders. In addition, it helps adjust the Earnings Per Share (EPS) or the Price Earnings (P/E), when the share is on downward trend.

Despite the fact that the TSE’s benchmark has tumbled more than 15 percent since November 12, the stocks are unlikely to lose more value, as most of them are already at rock-bottom values.

Furthermore, the recent practical measures taken by the government are expected to slow down the overall selloffs at the equity market; however some analysts indicate that the benchmark is at its 65,000-point barrier and is unlikely to keep falling down.