EghtesadOnline: Equity indices extended decline in the third session on Monday, tracking weakness in commodity stocks and uncertainty regarding the future of export-based companies. Heavy selling was witnessed in at the petrochemical, banking and mineral counters.
Tehran Stock Exchange main index had shed 1,600 points on Sunday and the slide continued on Monday, albeit with less intensely. Auto and refinery stocks had investors' appeal, thanks to the capital boost for carmakers and new attention toward big refiners.
Commenting on the recent bear market, Shahin Cheraghi, a market analyst said Iran's capital market usually follows the country's economic landscape as indices are heavily reliant on petrochemicals, mineral and steel products.
"As was predicted, the effect of US sanctions and decline in international oil prices was obviously bound to affect the stock market," Cheraghi told the Financial Tribune.
"However, the difference this time is that while during the previous round of sanctions it was possible to transfer funds for Iran. That is no more the case," he said.
Another reason for the current volatility, he said, is the volume of liquidity which has almost doubled since the previous sanctions.
“The steep rise in liquidity in fact encourages people to rush to parallel markets like gold and foreign currency. While in the past, the rials’ fall meant increased capital for export companies and by extension a boom for the stock market. Today the underlying pessimism about the future of companies due to the US sanctions has become a hindrance.”
He went on to say, “For instance the rial lost 30% of its value last month, but that did not benefit the stock market as would have been expected.”
Cheraghi does not hold out much hope in the so-called European special vehicle purpose and its role as a game changer because of its narrow scope on food and drugs plus differences within the European Union itself.
In his view the Tehran government should strive to curb the liquidity growth and learn to stand on its own feet.
Announcement of the much-delayed launch of the SPV to help trade with Iran despite US sanctions was expected on Monday.
The mechanism is key to EU effort to keep Iran from quitting the 2015 nuclear accord that limited nuclear program in exchange for sanctions relief.
The SPV statement was to be discussed by EU government envoys in Brussels on Monday morning and be released soon after, if all 28 member states approve, according to Bloomberg.
How Indexes Performed
The TSE's main index TEDPIX lost 965.84 points or 0.60% on Monday to end trading at 159,832.2.
About 1 .99 billion shares valued at 4.78 trillion rials ($40.5 million) changed hands at TSE for the day.
Trading at TSE and over-the-counter Iran Fara Bourse starts on Saturday and ends Wednesday.
Darou Pakhsh Pharmaceutical Co. and Sepahan Oil Co. were the biggest winners as their shares went up 5 % to 6,176 and 29,251 rials, respectively.
Shahid Ghandi Corporation (a communication cables manufacturer in Yazd Province) incurred the biggest loss among all TSE-listed companies and went down 4.99% to 3,713 rials per share.
Persian Gulf Petrochemical Industries Company contributed the most to the benchmark fall, followed by National Iranian Copper Industries Company and Chadormalu Mining and Industrial Company.
Isfahan Oil Refining Company gave the biggest boost to the benchmark index, followed by Tabriz Oil Refining Company and Iran Khodro (a leading car maker).
The Price Index lost 279.96 points to close at 46,332.1.
The First Market Index was down 839.15 points to post 118, 948.9. Second Market Index decreased by 1,311.92 points to reach 312,631.1.
TSE 30 went down 54.3 points to settle at 7,713.3 and the TSE 50 ended 45.79 points lower to finish at 6,808.4.
Iran Fara Bourse’s main index IFX lost 33.12 points or 1.71% for the over-the-counter exchange to close Tuesday trade at 1,909.11.