'Bubble' in Iran's exchange and economic development
Trend Persian Desk Head Dalga Khatinoglu
The International Monetary Fund (IMF) predicted the economic growth of Iran at zero for 2011.
The IMF estimated Iran's economic growth at 1 percent in 2008, 0.1 percent in 2009, and 1 percent in 2010.
In its 2010 report, the IMF reported that Iran's GDP growth was at 1.1 percent in 2009 and forecasted the figure to reach 1.6 percent.
Iran refused to publicize the official economic development data from 2009. Claiming about a continues rapid economic development in the country, the Iranian president stressed that 1.6 million jobs were opened over the last year and 2.5 million in this year. The Iranian officials link the high index and increase in the price of shares in the exchange observed over the past year, particularly the fact that the index reached its record in the past ten days, with a normal and constant situation in the country.
Roughly 375,000 million shares were sold at the Tehran Exchange on Monday. Based on the official data, the share price hit $135 million, which lead to increase of the exchange index by 480 points or 2 percent, amounting 25,023 points. Today, the figure is 27,000 points.
Ex-adviser to the central Bank of Iran Bijen Bidabad believes such a development in the exchange is linked with the country's low economic development, as well as with the fact that population prefers to purchase shares in the exchange rather than invest in the industry and service spheres.
The development in the Iranian exchange is nothing more than a 'bubble' that can burst at any time, he told Trend.
Serious crisis has been observed on the Iranian markets, including the real estate market and construction field over the past one year. According to the Iranian Central Bank's statistics publicized in 2010, licenses issued by the city executive powers decreased by 23 percent in 2009 compared to 2008. Crisis in the construction field is still in progress, so there is a necessary condition for mass money flow in exchange.
Liquidity increased from $170 billion in 2008 to the current $246 billion.
There are other reasons causing increase in price and amount of shares at the exchange. Furthermore, the companies with the major amount of transactions at the exchange draw attention.
The companies affecting the increase in exchange index over the past few months included the Telecommunications Company (97 points), Isfahan steel company Fulad Mubareke (57 points), the Chadramali industry and mining company (36 point), Mapna consortium (27 points) and Gol-e Goher company (26 points).
The companies with shares increasing in price at the Iranian exchange are directly related to the authorities, or the establishments close to the authorities. These companies may easily receive state financial aid in case they are in loss. So, they do not fear of loss or drop in prices of their shares during the economic crisis.
According to official statistics, investments put in T-bills at the exchange made a 85 percent profit over the past one year.