August 13, 2020
The general index of the Tehran Stock Exchange (TSE) fell by nearly 25,000 points on Wednesday after a drop of 65,000 on Tuesday to reach 1.97 million.
Domestic media says the drop was caused by the failure of the National Iranian Oil Company (NIOC) and the Iranian Privatization Organization (IPO) to reach an agreement on how to offer the shares of oil refineries in the market.
`Borna News Agency, in a report on Wednesday, said the IPO intends to offer the shares to buyers directly. Since there is not enough liquidity in the market to purchase the volume of the shares on offer, however, the indices have dropped.
Tejarat News has speculated on the reasons for the drop, including the government’s manipulation of the market, the impact of inexperienced buyers and a loss of trust in the market, as well as the implementation of the second stage of releasing the government-issued Justice Shares.
The general index of TSE has more than doubled since late March. The indices have been strong for the third consecutive year despite the economic crisis and recession that have been plaguing the country since the reintroduction of U.S. sanctions in May 2018.
Experts have been warning about the historic run of the market and the government’s possible meddling through manipulation of interest rates, intended to lure small investors and sell nearly five trillion rials of government assets. The value of these assets is ten timesmore than the assets planned to be privatized in the previous year.
In the first seven months of the previous calendar and fiscal year, spanning from March 21, 2019 to March 20, 2020, the government of President Hassan Rouhani managed to sell only 1,870 billion rials of the 44,500 billion rials of shares projected for privatization. No report has yet been published for the last five months of the year. In a similar situation two two years ago, only 3.770 billion rials of the 25,500 billion rials of shares on offer were sold in the stock market.
The rise in Tehran’s stock market revolves around 650 companies engaged in production of petrochemicals, steel and copper, oil refineries and suppliers of raw materials. On Wednesday, the Social Security Organization’s investment fund, Persian Gulf Petrochemical Industries, Ghadir Investment Company, National Iranian Copper Industries and Isfahan Refinery had the biggest drop in the value of their shares, which cumulatively made the a significant impact on the value of the stock market.
Since March 21, the rial has lost 40 percent of its value, causing an increase both in the rial value of the companies on the stock exchange market and the rial value of their exports.