Stocks kept losing ground during the week ending January 21, with the wobbling economy weighing both on the investors, and speculations over the performance of listed companies at the Tehran Stock Exchange (TSE) in the mid run.
The limping economy due to the oil plunge and dears of a possible budget deficit keep trimming positive outlook of the economy in the future, which poses a dramatic threat to the stock market.
Fears gripped investors as they have already lost money to a large extent. The historic losing streak at the TSE within the past 3 weeks was accompanied by huge lineups, however the TSE recorded sloppy trades with low trade volume and value.
According to the TSE data, the overall index shed 910 points or 1.38 percent to record a 2.09 percent in comparison with the prior trading week to settle at 65,029. The first market index pulled back 1,021 points to end at 47,853. The second market index was up 510 points to stand at 128,224, and post 0.4 increase compared to the same period last year.
The five working days at the TSE were accompanied by a 20 percent decline in trade value. Moreover, more than 192,000 of fixed rate participatory bonds were traded, valued at about 191 billion rials, registering 13.3 and 12.6 percent decline respectively.
Market analysts believe that the stock market fate is associated with the nuclear talks between Iran and the P5+1, as well as the oil price trend. Iran has an oil-based economy, which is highly vulnerable to the oil price fluctuations. Adding to the investors’ stress is the banking restrictions due to the western sanction.
The ambiguity over the nuclear talks is lingering, and nobody can foresee the end of talks. In the meantime, some market analysts believe that the tumbling oil price is leverage to squeeze Iran’s economy, and that even the Saudi king’s death cannot alleviate the market with a persistent uptrend in oil prices.
King Salman, Saudi Arabia’s new ruler, will keep Oil Minister Ali Al-Naimi in his post, bolstering expectations that he will continue the policy of maintaining crude output to preserve market share even as prices have plunged, marketwatch reported.
Salman, 79, issued a royal decree to retain current ministers, according to the official Saudi Press Agency. Al-Naimi led OPEC’s November 27 decision to maintain its crude production even as shale supplies spurred US output to the highest in three decades.
Hence, Iran should not expect a solid uptrend at the oil price, and other sources of revenue should be highly considered.
Not even a high volume of export can firmly bolster the equity market, given the fact that money cannot be settled at Iranian bank accounts. Iranian traders have to deposit overseas and find other ways to enjoy the revenues. So, the only considerable source of revenue is inside the country. As the government proposal underlines, tax, mining royalties, and probable depreciation of local currency against foreign currencies through various ways including adding to the governmental exchange rate for foreign currencies have been targeted as safe sources of revenues. However, the considered policies are expected to undermine household incomes.
