What causes the downward slide in Iran’s stock market?

What causes the downward slide in Iran’s stock market?

By Dalga Khatinoglu

Continuance of declining indexes on the Tehran Stock Exchange caused protests by shareholders on Jan.21.

Tehran Stock Exchange main index (TEPIX) dropped 535 points, or 0.8 percent on Jan. 21 day-to-day and stood at 65,028 points.

The fall of Tehran's main index started in early 2014 and has dropped 22 percent so far.

Over the past seven days, the decline accelerated, which has created alarm among shareholders.

But, why is Iran's stock market collapsing, while the official economic statistics indicate 4 percent GDP growth versus about 8.7 percent contraction during last two consecutive fiscal years?

Iran's fiscal year started on March 21.

The CEO of Tehran Stock Exchange, Hassan Ghalibaf Asl said Jan.21 that the plunge in oil price and parliament's disagreement on the budget bill proposed by government has pushed TEPIX down.

However, regarding the Tehran Stock Exchange's official statistics, TEPIX has been in decline since early 2014, several months after President Hassan Rouhani took office.

Bijan Bidabad, the former senior consultant to the Central Bank of Iran, told Trend Jan.22 that continuance of a decline indicates the worsening of political, financial or economic spheres.

"Regarding the Tehran Stock Exchange, delays on achieving comprehensive nuclear deal, losing the oil revenues and delaying improvement of budget bill by parliament likely have the most affect on TEPIX," he said.

Review of TSE during past five years

There doesn't seem -at first glance- any logical reasoning behind Tehran Stock Exchange's performance during last five years.

Below is a chart of TEPIX's performance over last five years, based on Tehran Stock Exchange's statistics.

The most growth in TEPIX happened in 2012 and 2013 after the US and EU imposed tight sanctions on Iran, leading to a 8.7 percent contraction of Iran's GDP. However, the country's currency, IRR, has dropped in value 3.5 fold since 2011.

Each USD was sold at 10,000 IRR in early 2011, while this figure reached 35,500 rials in mid 2013. IRR became stronger against USD during a period from 2H13 to 1H14, but plunged again to mid-2013 level.

For instance, rapid devaluation in 2H12, pushed Iranian share prices up 40 percent in four months.

On the other hand, semi-state companies had a great share in TEPIX and it has been said the government's support of these companies forced their share prices higher creating a rapid rise in TEPIX that was only a bubble.

Current situation

The Iranian government submitted new fiscal year's budget bill to parliament in December 2014, but it hasn't been approved yet due to disputes over several points including oil price.

Iran's current government budget depends up to 40 percent on oil revenues, while the oil price has plunged from $107 in mid-2014 to around $45 currently.

Petrochemical plants have a big share in TEPIX, while the global petrochemical products price plunged by 18 percent in December 2014 month-to-month and the decrease continues but at a slower pace.

Petrochemical products export with worth $12 billion shares about 30 percent of Iran's total non-oil exports (including gas condensate, LPG, etc.).

Another factor impacting TEPIX is that while Iran and P5+1 have extended interim nuclear deal obtained in November 2013 two times by June 30, 2015, there is not any sign of agreement between sides yet.

Edited by CN

Dalga Khatinoglu is an expert on Iran's energy sector, head of Trend Agency's Iran news service

Follow him on @dalgakhatinoglu

We are having tea in pear-shaped glasses, baklava on Jidir Duzu. Let our friends rejoice, enemies get blind! - President Aliyev (PHOTO/VIDEO)
We are having tea in pear-shaped glasses, baklava on Jidir Duzu. Let our friends rejoice, enemies get blind! - President Aliyev (PHOTO/VIDEO)
It is such unique feeling to see Shusha, to return to Shusha - President Aliyev
It is such unique feeling to see Shusha, to return to Shusha - President Aliyev
Commander-in-Chief came to Shusha for first time in 30 years and, frankly, does not want to leave - President Aliyev
Commander-in-Chief came to Shusha for first time in 30 years and, frankly, does not want to leave - President Aliyev
Loading Bars
Latest
Trump directs government to minimize procurement from China
WhatsApp to delay launch of update business features after privacy backlash
Brazil reports more than 1,000 COVID deaths for fourth consecutive day
Number of COVID-2019 cases across globe up by over 709,000 in past day
UN chief calls for "far greater solidarity" in message on 2 millionth COVID-19 death
Money transfers to Georgia up in December 2020
WHO advises against proof of COVID-19 vaccination for int'l travel
BMW to recall 21,693 cars in Russia
We are having tea in pear-shaped glasses, baklava on Jidir Duzu. Let our friends rejoice, enemies get blind! - President Aliyev (PHOTO/VIDEO)
It is such unique feeling to see Shusha, to return to Shusha - President Aliyev
Commander-in-Chief came to Shusha for first time in 30 years and, frankly, does not want to leave - President Aliyev
Those who grew up over 17 years have liberated these lands - President Aliyev
Prepare report here, not in your cabinets - President Aliyev to international organizations
Global COVID-19 deaths surpass 2 mln
People of Azerbaijan will live in Shusha forever - President of Azerbaijan
All martyr families will be provided with apartments and houses by state - President Aliyev
In May 1992, Shusha was occupied as result of betrayal of PFPA-Musavat duo - President Aliyev
Today, I brought busts of our geniuses Khurshidbanu Natavan, Uzeyir Hajibayli and Bulbul to Shusha - President Aliyev
It is impossible to imagine Shusha without Jidir Duzu, and Azerbaijan without Shusha - President Aliyev
Mausoleum of Molla Panah Vagif was inaugurated exactly 39 years ago, I was standing right here - President Aliyev
After desecrating busts of our genius personalities, Armenians took them to Armenia to be melted down and sold - President Aliyev
Armenia must answer in international courts - Azerbaijani MFA
I said no, we will take these busts back only after liberating Shusha from enemy, put them in their original places - President Aliyev
Iran ready to establish joint automobile company in Iraq
Kyrgyzstan’s public debt reaches USD 4 bln 887.46 mln
Turkey reports over 8,000 new COVID-19 cases
UK records another 55,761 coronavirus cases, 1,280 deaths
Israel has vaccinated over 2 mln people against COVID-19
Britain tightens borders to keep out new COVID-19 strains
Kazakhstan's national operator for main oil pipelines reports decrease in oil transport
Int'l community must condemn Armenia's actions against Islamic religious monuments - Azerbaijani MP
Azerbaijani Economic Council holds first meeting in 2021
Shusha's residents proud of seeing Azerbaijani president in Shusha city
Group supporting Russian export to Azerbaijan renders assistance for foreign trade transactions in 2020
President of International Judo Federation congratulates Azerbaijani president
Azerbaijan increases total volume of exported gas in 2020
European Gymnastics to focus on competitions planned for 2021
Azerbaijan's foreign trade balance remains positive in 2020
Export operations between Azerbaijan and Australia greatly increase
Azerbaijan establishes National Agency for Mine Clearance of Territories of Azerbaijan
Int'l structures willing to cooperate for 'Green Energy Zone' in Azerbaijan's Karabakh (PHOTO)
Georgia reveals volume of electricity imported from Azerbaijan
Georgian Hualing Group implements new construction project
Georgia outstripping European preferences for innovations in some areas - MasterCard
Afghanistan always supports Azerbaijan in its just cause - Ambassador
Azerbaijani, Finnish FMs discuss latest situation in region
Whole world to see rapid economic recovery in Azerbaijan's liberated lands - Russian MP
Azerbaijani, Russian FMs exchange views on tasks of Jan. 11 joint statement
Georgian Enguri HPP rehabilitation project carried out with support of EBRD and EU
President of Georgia, NATO Secretary-General to meet in Brussels
How can leaders of Muslim countries be friends with country that destroyed mosques? - President Aliyev
President Aliyev presented Holy Quran to Saatli Mosque
In near future, we will ensure restoration of Shusha in planned manner - President of Azerbaijan
Despite all pressures, phone calls and threats, I said that we would go to end - President Aliyev
I have come to Shusha using the victory road - President Aliyev
Great return begins, all work has begun - President of Azerbaijan
Uzbekistan, Tajikistan resume regular flights
Azerbaijan sees growth trend in car insurance segment
Azerbaijan’s PASHA Bank ends 2020 with big profit
Wells Fargo profit beats Wall Street estimates as credit costs fall
Citigroup quarterly profit beats estimates as loan loss provisions slow
OSCE Chairperson-in-Office appoints Special Representative for South Caucasus
Parliament's plan on steel sector to damage Iran's exports - Steel Producers Association
Azerbaijan announces starting date for COVID-19 vaccination
Port of Baku starts cooperating with Belgium-based int'l training center
Azerbaijani ombudsman visits persons detained during anti-terror operations in liberated lands
Most of Uzbekistan’s population to be provided with COVID-19 vaccine
International DOPPELMAYR to finish construction of Georgian ropeway
Demand for marble products of plant in Turkmenistan’s Akhal region increased
Azerbaijan shows video footage from Gasimli village of Aghdam district (PHOTO/VIDEO)
Uzbekistan reconstructs number of water supply and sewerage networks Bukhara region in 2020
Azerbaijan discloses amount of compensation paid to depositors of closed banks
New gas compressor station put into operation in Turkmenistan
Jewelry production plant launched in Uzbekistan’s Tashkent
Georgia sees increase in subsistence minimum
Establishing Nakhchivan corridor will add new artery to Middle Corridor - AIR Center
Georgian citizens to have high-quality COVID-19 vaccines
Azerbaijan confirms 494 more COVID-19 recoveries
First Vice-President Mehriban Aliyeva: I am very happy to be in our liberated ancient city of Shusha (PHOTO/VIDEO)
Karabakh regional branch of Regional Development Public Association to operate in Shusha
Azerbaijan, Pakistan discuss prospects for development of military co-op
Azerbaijan's 11M2020 expenses for importing EU goods up
BMW aims to double fully-electric vehicle sales in 2021
Embassy of India organizes online business meeting to promote Indian Basmati rice (PHOTO)
Askar Mamin reappointed Kazakhstan's prime minister
Azerbaijani wagon washing station shows record performance following automation (PHOTO)
Azerbaijan reveals number of vessels repaired at 'Bibiheybat' Shipyard in 2020
Schoolchildren gain their first achievement in 2021 with Azercell’s support
Azerbaijan’s import of fruits, nuts down in 2020
FAO supports Uzbekistan’s Kashkadarya region during COVID-19 pandemic
Azerbaijani president, first lady visit building of executive power, house-museum of Bulbul in Shusha
Kazakhstan decreases goods import from Austria amid COVID-19
MP suggests Iran obtains its frozen assets in S.Korea via essential goods
CISCO increases number of services to be automated in Azerbaijan
Ukraine excludes Azerbaijan from list of dangerous countries due to COVID-19
Azerbaijani big bank’s capital up as of 2020
Passenger transport volumes plummet in Kazakhstan in 2020
WHO summarizes results of activities in Turkmenistan for 2020
Oil demand to be over 100 million b/d again by late 2022
Kazakhstan's Aktau port opens tender to buy accumulators
All news