The Tehran Stock Exchange (TSE)’s main index notched brief gains in a seesaw session on Tuesday, after the benchmark’s gains massively evaporated during the past three consecutive trading days.
According to the Financial Tribune analysis, the TSE’s gauge has plunged more than 9.5 percent on the nose since November 12, with the severe volatilities pushing investors to take their cash out of the equity market in a bid to avoid more losses.
The recent controversial selloffs have been triggered by the ongoing oil price nosedive, and an imminent budget deficit, respectively. Despite the fact that oil price has a lot to do with the persisting bearish trend at the stock exchange, some analysts believe that oil price slump is a double-edged sword, so it may or may not endanger all of listed industries at the TSE.
Petrochemical sector is among the industries expecting a downtrend for the value of their commodities in the near future. That would be due to cheaper feedstock, and also lower raw material prices. It may portray a gloomy atmosphere for them due to potentially lower revenues, while, as the greenback is surging in the market, the trend would stimulate petrochemical complexes to offset revenues with increasing the volume of exports, although considering the frozen revenues piled up overseas, hence the offset may not be guaranteed.
The recent slump at the TSE could not be considered an unexpected weakness, said Fardin Aghabozorgi, head of Ayandeh Bank brokerage to the Financial Tribune in an interview on Tuesday, adding that “almost two thirds of the listed firms at the TSE, accounting nearly for one third of the total market value (3,300 trillion rials), are linked to the oil and commodity prices.”
He further elaborated that some industries like tire manufacturers can enjoy the gap between getting cheap raw material and selling commodities, while giant sectors like petrochemicals are endangered by the drop in global prices.
Speaking on the dramatic nosedive of the benchmark, Aghabozorgi put the blame on the uncertainties over the economic outlook, adding that “based on the next year’s budget, the oil price is set at $72 per barrel, while currently the average price is almost $55 per barrel.”
Adding to the ambiguities rattling the market is rial’s depreciation, as well as uncertainty over a comprehensive agreement between Iran and the P5+1 in the ongoing nuclear negotiations.
Panic selloffs and irregular buying at the stock market may result in heavy losses. Various indicators contribute to picking up a share. These include the listed firms’ balance sheet – a company with a lot of cash on its balance sheet is superior to the one excessively burdened with debt. Moreover, a lower Price Earning (P/E) ratio is significantly an important leverage to pick a share. In addition, a portfolio should be diversified across multiple sectors.
As next year’s projected revenues seem farfetched, investors should cautiously move ahead. The dramatic oil price drop has heavily contributed to the stock market slowdown, so a bullish sentiment may remain improbable for the next few months.
It is hard to disregard the looming economic hardships; however, the implementation of the contractionary economic policies along with the monetary base strategy of the Central Bank of Iran may trim the gloomy speculations.
Glimmer of Hope
The overall index managed to step out of the red territory. Yet, the mood remained fragile at the equity market.
According to TSE data, the TEDPIX edged up 62.8 points or 0.09 percent to end at 69,605.4. The first market index rose 60.2 points or 0.12 percent to settle at 51,001.1. The second market index ticked up 32.5 points or 0.02 percent to 138,706.5. The free float index gained 153.1 points or 0.19 percent to stand at 79,428.5. The industry index, as the only market laggard, shed 48.2 points or 0.08 percent to finish at 58,427.7, and the blue chip index rose 1.3 points or 0.04 percent to endthe day at 3,118.8.
More than 645 million shares change hands, valued at almost 1.4 trillion rials, demonstrating that both volume and value of trade slightly ended lower compared with Monday’s trade.
Shortly after the extension of the nuclear talks, the financial group kept wiping out its recent gains, while after a series of broad retreats, local listed banks at the TSE topped the list of positive contributors to the benchmark. Mellat Bank stood first, Saderat Bank took the second place, and Saipa, a leading car manufacturer, stood third.
The National Iranian Copper Industries Company had a gloomy trading day with the most negative impact on the benchmark. Golgohar Mining and Industrial Company and Chadormalu Mining and Industrial Company took the second and third place, respectively.
