A former capital market official has recommended authorities in charge not to waste liquidity from the National Development Fund of Iran for investing in penny stocks.
In a talk with IRIB news, Mostafa Omid-Qaemi, a former CEO of the junior equity market Iran Fara Bourse, referred to a plan that involves tapping the sovereign wealth fund to prop up the Tehran stock market after its main index plunged 30% in two months.
“It is not wise to use public resources for buying shares lacking potential value,” he said.
Listed companies involved in export, banks, investment companies and producers of basic goods are the best stocks, he opined.
Following historic gains since the beginning of the current fiscal year (March), Tehran’s share market went into a tailspin from early August.
The benchmark of Tehran Stock Exchange, TEDPIX, grew close to 270% before diving deep into the red and recently paring 30% of past gains.
The government has made concerted efforts to prop up the market by requiring institutional buyers and investment funds to boost demand.
Struggling to find ways to boost the market, stock market authorities have approached the NDFI for help.
Last week the High Council of Securities and Exchange, approved a decision based on which 1% of NDFI revenue would be transferred to the Capital Market Stabilization Fund.
CMSF was created in 2017 to help resolve the credit crunch in the bourse. It has the task of supporting stock markets and safeguarding the interest of investors.
The fund was launched with an initial 3 trillion rials ($12 million) capital borrowed from the NDFI. The idea of borrowing from the NDFI goes back to its inception.
At its birth, the NDFI was supposed to inject 1% of its resources into the fund – a plan that never saw the light of day.
“The Securities and Exchange Organization is pursuing the issue for long,” Hassan Qalibaf-Asl, the managing director of the SEO said, adding that “this would be a great opportunity given the current status of the market”.
NDFI, which is independent of the government, was founded in 2011 as a sovereign fund for future generations when government earnings are high, especially from oil and gas exports.
Like all wealth funds, it lends to both public and private firms in need when national revenues are down, namely during low oil prices.
