Tweaking Share Market Prices Now Premature
EghtesadOnline: Raising the daily price spread in the share market is not on the agenda of the market regulator, managing director of Iran Fara Bourse, the junior equities exchange, said.
Meisam Fadaee told a conference that policy and decision makers are waiting for stable conditions to raise the price limits.
“Given the present uncertain climate, it was decided to postpone raising the price spread to a time when conditions are stable,” Fadaee was quoted as saying by Securities and Exchange News Agency.
He pointed to fears about potential deficits in the government’s budget and the uncertain future of Iran’s nuclear deal as the two main impediments to expanding the daily price limits.
Economists and analysts say economic stability is tied to restoring the historic 2015 nuclear accord, as listed companies are expected to do better after financial restrictions are removed and foreign trade improves. Removing US restrictions on international money transfer will also help the government repatriate billions in forex assets and revenue.
Expanding daily price spread has been a long demand of nervous investors.
Observers say limiting the daily price fluctuation is not in the interest of the share market. Due to its harmful impact on market sentiment and liquidity of stocks, experts and bourse authorities have a consensus that changes to the daily price spread is now a must.
Decision-makers at the Securities and Exchange Organization say increasing the daily price range can be undertaken “in phases to avoid potential harmful effects” on the market.
It was decided in January to raise the spread in several phased by 1 percentage point each time. The SEO raised the daily price range by 1 percentage point to ±6 in April. It was supposed to increase by the same amount each season.
Before that share prices could go down -5% and rise +5% in each trading session -- a procedure that existed for years.
Vice-chairman of the SEO Mohsen Khodabakhsh earlier said that the price spread in Tehran’s stock market will increase up to ±10% by end of the current fiscal year in March 2023.
The regulator recently made some temporary changes in the highly volatile market. In bid to save the stock market from further collapse the SEO decided to increase the limit up price and decrease the limit down.
As per that decision in February 2021, share prices could move from -2% to +6% a day. As anticipated, the measure failed to prop up the troubled bourse, delayed market correction and prolonged the downturn.