By Mahnaz Abdi

Stock market, a ground for materializing ‘Surge in Production’

June 10, 2020 - 17:23

TEHRAN- The current Iranian calendar year (began on March 20) is named the year of “Surge in Production”, indicating that many endeavors should be made in all sectors for realizing a jump in the country’s production status.

Materializing this motto requires strong financial support for the production units, and directing the liquidity toward the production activities.

It is obvious that the stock market can play a significant role in the realization of this objective.

The country’s stock market enjoys high potential to support domestic production and as its capacity is being more and more expanded, it should be noted that it’s now the best place for attracting the liquidity to the production.

 A prosperous market

While the Iranian stock market has been developed in recent years through many measures such as applying more financial instruments and also making the people more acquainted with the stock market activities, this market has been booming since the previous year.

In the past Iranian year 1398, the performance of the Tehran Stock Exchange (TSE), which is the main stock market of Iran, was unprecedented, as its main index, TEDPIX, which had closed at 178,000 points at the end of the calendar year 1397, climbed to 512,000 points at the end of last year.

The previous year was in fact a golden era for the Iranian stock market, as the volume of trades and the number of shareholders witnessed some outstanding growth, not at all comparable with those of its preceding years.

The trend of sharp increase also continues in the current year. TEDPIX has already passed one million points in this year registering a new record in the country’s stock market’s history, something almost unbelievable just some time ago.

Many factors are contributing to the prosperity that the stock market is experiencing, one of which is that making investment in this market is now more profitable compared to the parallel markets such as those of gold coin and foreign currency. Meanwhile, as previously mentioned, people are getting more familiar with activity in the stock market.

Promotion of production elements

The need for securing the required funds for the production activities on one side and the promising status of the stock market on the other side highlights how much this market can pave the way for realizing the slogan of “Surge in Production”.

The stock market can surge the production through promoting the major elements of production, which are capital, workforce, and technology.

While the number of production companies listed on the TSE has been continuously rising since the past year, the country is trying to bring also more knowledge-based companies into this market in the present year.

In the current year, a new index will be introduced as the knowledge-based index in the TSE, for which the initial measures have been already taken.

This action makes the activities of knowledge-based companies in the stock market more tangible.

Attracting attention of officials

As the stock market is flourishing more in the country, it has brought the officials' more attention to its role in financing projects in different sectors of the country, and it has resulted in initiating some new approaches regarding this market.

For example, Iranian Transport and Urban Development Minister Mohammad Eslami has recently announced that his ministry’s planning to offer 12 freeway and railway projects to be financed through the country’s stock market.

Also in early April, Central Bank of Iran’s Governor Abdolnaser Hemmati said that the stock market’s role in financing should be expanded regarding that this market is being highly welcomed.

Fast, low-cost, transparent financing

While the motto of “Surge in Production” defines a heavy responsibility for all sectors of the country, the stock market can play a key part for the materialization of this motto, as it can provide financing in a rapid, low-cost, and transparent way.

And this role becomes more important when taking the sanctions into account.

Under the current condition, when the U.S. cruel sanctions on the Iranian economy have created many limitations for Iran’s industries and domestic production, the stock market can act effectively in supplying the production sector with required funds, in a way faster and at a lower cost compared to receiving the banking facilities.

While through providing rapid and low-cost financing in a ground of transparency, the stock market directs the liquidity into the production, it somehow prevents from the attraction of liquidity by the unproductive markets of housing, gold, and foreign currency, and in this way, it protects the national economy against the inflow of liquidity which makes high inflation.

In fact, the stock market supports the industries and domestic production on one side, and strengthens the people’s contribution to the national economic growth on the other side, while the people also make profit out of their investments.

Privatization plan invigorating stock market

The prosperity in the stock market is also seen to continue as the government is now seriously following up the implementation of the privatization plan and has said that it will speed up the process of offering more shares of state-owned companies in the stock market during the current Iranian calendar year.

But it should be noted that privatization should spur productivity, not just collect the capital.

All-out co-op among government, SEO, listed companies, shareholders needed

To help the stock market move in the way of realizing “Surge in Production” all-out cooperation among the government, Securities and Exchange Organization (SEO), the listed companies, and the shareholders is required.

Each of the mentioned bodies has responsibilities to this end.

The government should encourage the state-owned organizations and companies for a more active presence in the stock market, it should also prevent the growth in the parallel markets such as housing, gold, and forex markets.

The SEO should prepare the ground for attracting more shareholders, improve trading condition, promote the culture of activity in the stock market among the people, develop the services offered by the stock market brokerage and consulting companies, offer incentives to the listed companies, and create more and more transparency.

The listed companies should offer proper, complete, and transparent information on-time and lead some proper part of the attracted investment toward boosting production.

And the shareholders should keep abreast of the latest news and information about the market, refer to the specialized financial entities including the brokerage and consulting companies, bring their savings into the stock market, lower the risk of investment via trading through the exchange-traded funds (ETFs), prevent from emotional reaction and approaches in decision making, and finally make investment in the productive sectors.

In general, the stock market can play a very effective role in a national economy by booming and invigorating different sectors.  It can act as a major supporter of the domestic economy.

In Iran, now that the stock market is experiencing a really flourishing era- right at the time when the liquidity should turn in the direction of production- the government, the SEO, and the people should take the advantage of this condition and help this market act as a major player in realizing the motto of “Surge in Production” which will bring economic prosperity for the country.

If such a thing realizes, it will be a real win-win for all involved bodies.

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