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Iranian equity market experiences unprecedented boom

Business Materials 13 December 2017 23:50 (UTC +04:00)

Tehran, Iran, Dec. 13

By Mehdi Sepahvand – Trend:

The fact that Tehran Stock Exchange has broken new records consecutively over the past weeks is owing to a number of factors, but these can also bring about a crash as easily, according to an expert.

The main index of the Tehran Stock Exchange (TSE) added 654.8 points or 0.71 percent, to end the trades at 93283.7 on Dec. 13. According to the TSE official website, about 1.7 billion shares, valued at $131.6 million (4.6 trillion rials) were traded for the day.

“As you know, over half of the TSE’s value comes from raw products, such as minerals, metals, and petrochemicals. Over the past one and half months, the value of minerals and metals in global market has increased,” Alireza Kadivar, CEO of T.M. Mellat Investment Company, told Trend December 13.

“Another factor that helped TSE grow was that the USD gained value over the rial as much as 5-6 percent over the same period,” he noted, adding that, since the TSE deals are carried out in dollars and then the money is changed into the rial, the increase in commodities’ value and that of the dollar made a synergy that skyrocketed the TSE.

Yet again, Kadivar said, a Central Bank of Iran (CBI) policy to reduce banking interest rates pushed money out of banks as non-risk investments and into monetary markets where people were willing to pay higher for stocks now that banking interests are lower.

Also, Kadivar noted, since about three years ago the TSE has devised rules for transactions which create easier surge in market index with lower volume of trade, that is, lower amount of fresh money.

“This has been one of the most important factors in the recent rise in the TSE.”

The expert then pointed out that the surge in the TSE could come down if some conditions are met.

“One could be that either the prices of commodities or the USD go down. The other could be for political influences over the market, such as new US sanctions or the worsening of current tension between Tehran and Riyadh.”

Also, he noted, the TSE’s mechanism of profitability on small trade volume could create bubbles if the other two factors stay as they are.

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