May 4, 2020, 9:15 AM
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Hot market for Iranian Stock Exchange amid coronavirus

Tehran, May 4, IRNA – While capital markets are experiencing a bitter situation in most of the countries grappling with coronavirus, trade of stocks in Iran's bourse recorded a historic surge and it is still going ahead with long steps.

Developments unfolding in Tehran's bourse have turned it into a heated discussion among various strata of the people, as all are interested in investing in the bourse.

First, we review the development of bourse in Iran, and then we will deal with the capital market situation in Iran how it reached a point where it still retains its appeal to the greater participation of the people.

The Iranian Stock Exchange is now 53 years old. In 1936, a Belgian named Ron Luther Feld compiled its articles of association after extensive studies and presented to the Iranian officials but its establishment was delayed for over 25 years due to the outbreak of World War II.

In 1962, a commission comprising officials from trade and finance ministries and Iran Industrial Development Bank devised an initial agreement to establish a stock exchange and finalized it.

After four years, in 1966, the law establishing the stock exchange was approved in the parliament and communicated to the Central Bank for implementation by the Ministry of Economy.

 About a year later, 1967, Tehran Stock Exchange officially began its activities by carrying out several transactions on the shares of the Industrial and Mining Development Bank, which was the largest complex of production and economic unit in Iran at that time.

Currently, four bourses are operating in Iran under the Stock Exchange and Securities Organization:

1 - Tehran Stock Exchange in which the shares of companies and other securities such as participation bonds are traded,

2 - Iran Fara Bourse (over-the-counter stock market) where shares of companies that fail to be listed on the Tehran Stock Exchange for any reasons are traded,

3 - Iran Mercantile Exchange where all kinds of goods such as petrochemical products, metals, agricultural products, and coin futures, etc. are traded,

4 - Iran Energy Exchange in which electricity-based energy products are traded as one of the most important energy carriers.

Iran's bourse has so far experienced many ups and downs since its inception. From 1967 up to 1978, the number of companies and institutions listed in the Tehran Stock Exchange increased from 10 economic enterprises to 142 companies.

After the victory of the Islamic Revolution 1979, the number of companies listed in stock exchange fell from 105 to 56 in 1988. It was due to consequences of the protracted imposed war which prompted the government to take ownership of many economic enterprises, and as a result, a large number of listed economic enterprises withdrew from it.

However, during the war years and even the years after it, the Iranian Stock Exchange was not well received by the general public and capital market enthusiasts. But gradually, with the expansion of its scope of activities and the presence of large economic companies, it attracted the attention of various strata of the people.

In recent years, the Iranian stock market has been accompanied by various leaps, which have sometimes broken world records. Especially over the past two years, government support and attention to this capital market have led the capital to move from bank deposits, housing, and gold to the stock market.

One of the reasons why the Tehran Stock Exchange is still breaking records these days is the government's support for the capital market and encouraging people to invest in the stock market.

Psychologically, this has contributed well to the overall market environment and further accelerated the growth of the stock market index.

Directing manufacturing companies to use new financial instruments is one of the government's most important policies, which led to increased attention to the stock market.

Accordingly, the government insists on supporting the stock market and wants the capital market to become a major financing base for the companies and the government and a place for people to invest.

Given the fact that the manufacturing sector needs a lot of capital and the banking sector is not able to finance it all, big companies are seeking to use new capacities in the capital market.

On the other hand, the government is trying to prevent people from operating in inflationary markets such as currency, gold, and housing sectors, it has paved the way for a presence in the capital market. It has also caused any stock to be traded on the stock exchange for the first time these days to be well received by the public.

The good reception has led the government to announce that we will see more offers this year, and that is why the license for liberalizing justice shares to be offered in the stock exchange was also issued.

On the other hand, the impact of declining bank interest rates on capital market transactions should not be overlooked, as many people have shifted their money to the stock market in order to earn profit from this positive space provided by the government.

The massive influx of liquidity into the stock market has eliminated all the fundamental issues in this market's transactions and has caused the risks to reach their lowest level and leave no impact on preventing the stock market index from rising.

Now the stock market is getting bigger and it wants to open its place in the Iranian families' investment basket, and on this basis, the stock market as a specialized issue has turned into a general issue, as in every forum, there is talk of prosperity and well reception of the stock market. It is expected that in the mid-term and after the public becomes familiar with the stock market, we will see the migration of deposits to the capital market.

Under the current situation, the initial offering of shares of companies in the stock market has not been able to respond to the buyers' growing thirst for shares. From the point of view of capital market experts, as long as suppliers are not able to respond to new players in the stock market, this market will gain new momentum and will have more energy to continue the upward trend.

At present, the Iranian stock market has changed from a small market to an influential market. In the past, it was driven by "a limited number of investors' huge sums of money", but currently, it is operating by "the small amounts of money possessed by a large number of investors".

According to capital market experts, the stock market will soon become a powerful political base in Iran that will change the politico-economic equations. Because while controlling inflation, it has led to adjustments in parallel markets (such as housing, gold, and foreign exchange) and is expected to reach its golden point by the end of Rouhani's administration.

By: Latif Nekouei


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