Baku, Azerbaijan, May 5
By Farhad Daneshvar – Trend:
Ahead of Iran’s May 19 presidential election the country’s economy is still struggling with deep recession but the stock market is on a bullish run.
Tehran Stock Exchange (TSE) Main Index advanced for the eighth consecutive week to close at 80127.1 this week, setting a new high for 2017.
This once again proves that stock markets sometimes turn to a distorting mirror of the real economy, but the current upward trend at Iran’s largest equity market appears to be impacted by political reasons rather than economic realities.
The positive trend of the TSE apparently runs a risk of a bubble which sooner or later will burst and the true reason behind the growing trend seems to be the fact that the market looks too much at the political developments, in particular the upcoming election.
Having a look at the TSE records, one can find out that the main index normally grows prior to the presidential elections in the country, even if the economy is ailing.
While the incumbent President Hassan Rouhani is seeking re-election in the upcoming polls, his fate may rest on the economic expectations of ordinary people.
Voters’ economic expectations may doom his re-election bid as the conservative and hardline opponents of the moderate Rouhani are drawing a black picture of the country’s economic situation suggesting that his landmark nuclear deal inked with the world powers in 2015 has failed to improve Iranians’ living conditions.
On the other hand rumors have swept the TSE building that a group of Rouhani’s supporters have joined efforts to help the TSE index to grow in order to signal a growth in the country’s economic situation.
One way to manipulate the market is artificially inflating the price of securities but how is this realized at the TSE?
The Capital Market Development was created under former President Mahmoud Ahmadinejad’s term in a bid to increase market liquidity by investing and offering market for stocks in the Tehran Stock Exchange.
According to the initial plan, the fund was supposed to be independent of the Securities and Exchange Organization (SEO), the regulator of the capital market in the country. However, the fund gradually became under the SEO control and it is now accused of market manipulation.
Some traders at the TSE criticize the fund’s performance saying that its investments are based on orders from the SEO in order to protect the main index. When the main index starts to fall, the SEO through the fund manipulates the market and pushes the index upward.
How presidential race causes upward trend in Iran’s stock market?
Baku, Azerbaijan, May 5