EghtesadOnline: Iranians’ tendency to invest in banks has declined drastically in favor of stocks and real estate markets, according to a poll by the Iran Student Polling Agency (ISPA).
ISPA asked a representative sample of 1,590 citizens from July 19 to 26 “which sector(s) they prefer to invest their savings.”
Results showed only 8.1% of respondents considered keeping their money in banks to protect their hard-earned savings. This was comparably lower than the 24.8% willing to invest in banks in a similar poll last year.
According to the results published by HIBNA, the news portal of Bank Maskan, last year 14.9% of respondents said they would prefer invest in housing. That increased to 17% in the latest poll.
Poll results also showed significant increase in the number of people wanting to invest in stocks. This is while hardly 1.5% preferred investment in shares last year.
The new poll showed 9.2% of the participants see the bourse as a rewarding investment. It needs mention that the poll was held when the bourse was climbing at full speed with investors making profits never ever seen in Iran’s stock market history.
Likewise, 5.8% were willing to invest in gold, and contrary to common belief, only 1.6% saw the currency market as a better option.
Almost 39% said they have little spare money for any investment this year. That was five percentage points higher than last year.
Driven by rising liquidity from bigger numbers of new investors, Iran’s share market saw a dramatic surge in the first four months of current fiscal year (March-July) with the main index of Tehran Stock Exchange, TEDPIX, soaring more than 260%.
In the previous poll in the middle of last year, banks seemed to be the best investment option, according to ISPA. This was followed by the housing sector, gold, forex and stocks.
Low Interest Rates
The main reason behind the declining traction of banks, and increasing popularity of investment in real estate and stocks, is rooted in lenders’ reluctance to offer higher interest on deposits.
The Central Bank of Iran has adopted expansionary policies to reduce the cost of money and encourage the people to invest in the struggling production sectors.
Interest on one-year maturity deposits is currently 16%. Likewise, interest on two-year deposits is 18%. Short-term deposits with 3-month maturity earn 12% interest.
Given the galloping inflation, interest rates are too low to encourage depositors to stay with banks. Data released by the Statistical Center of Iran show that the average goods and services consumer price index in the 12-month period ending Aug. 21, increased by 25.8% compared to the corresponding period last year.
The declining attraction of investment in banks is also confirmed by monetary data published by the CBI. The bank said increase in sight deposits far outpaced term deposits in the first quarter of the current fiscal year (March 20-June 20), reflecting depositors’ aversion to keep money in banks for extended periods.
Total sight deposits rose by 780.9 trillion rials ($3.1 billion) in Q1 to reach 4,442.5 trillion rials ($19b), posting 21.3% growth. On annualized basis, sight deposits rose 70.4%, according to a CBI monthly monetary report.
This is while term deposits registered 5.2% increase in the same period, growing by 968.6 trillion rials ($4b) to reach 19,536.6 trillion rials ($78b). Term deposits rose by 27.7% year-on-year.