Baku, Azerbaijan, June 4
By Farhad Daneshvar - Trend:
While the Tehran Stock Exchange (TSE) continued its downward trend over the past week, a group of market observers believe that luring foreign investment will contribute to the market's climbing out of the recession.
The TSE main index over the past two months since the new Iranian calendar year (started on March 20) fell by 768 points to close at 76,084 on June 2.
The downward trend in the TSE comes following an extremely positive reaction to the implementation of the Joint Comprehensive Plan of Action (JCPOA) Jan. 16, which resulted in the removal of nuclear-related sanctions imposed on the Islamic Republic's key energy and financial sectors.
Elaborating on the reasons behind the volatile market Alireza Kadivar, an official with Iran's Novin Investment Bank and financial analyst, told Trend the week performance is caused by two main reasons.
First of all, following the implementation of the JCPOA, a large number of excited investors in the TSE aiming to reap fat profits rushed to purchase shares, so the main index immediately jumped by 25 percent.
However, the market soon started to correct itself as the JCPOA has partially failed to fulfill expectations in attracting foreign investment due to the circumspect behavior of international bankers towards re-establishing ties with the Islamic Republic.
Concerns over running afoul of US regulations have made the global bankers reluctant to do business with Iran.
But Kadivar suggests that the lack of banking ties with the rest of the world is not the sole reason posing serious obstacles to the growth of the TSE.
"Unlike the expectations, Iranian banks have failed to reduce the interest rates," Kadivar said.
The expert believes if the Iranian banking system manages to reduce interest rates, investors will be encouraged to move their assets from banking accounts to the Stock Exchange which will help companies to increase their price-earnings ratio (P/E).
Coming to the country's economic overview, the large number of recent business deals inked between Iran and international companies are expected to contribute to boosting Iran's depressed economy.
Some market analysts believe that the barriers for Iran to do proper trade will be slowly removed, however Kadivar thinks Iranian companies, in short term, are unlikely to become profitable.
Farhad Daneshvar is Trend Agency's staff journalist, follow him on Twitter: @Farhad_Danesh
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