By Ebrahim Fallahi

How can govt. really support stock market?

April 18, 2021 - 15:18

TEHRAN - Unprecedented fluctuations in the Iranian stock market over the past few months have led shareholders, experts, and scholars to call for the government to increase its support for the market, some shareholders want the government to guarantee the return of their stocks, some believe providing infrastructure is the best way to help this market.

Some, on the other hand, believe that the government should not interfere in the stock market, saying the government's pre-ordered and unrealistic pricing of some state-owned shares is the main reason for the capital market’s current downward trend.

Now the question is how the government can really support the stock market to help it get back on its trail?

So far, the government has repeatedly stated that the activities carried out in this market are not aimed at interfering in stock exchange transactions or directing the market, but are efforts for reducing the bubble created in the market and to prevent further decline of the stock market index.

Last week, in the 216th meeting of the Government Economic Coordination Headquarters, President Rouhani presented a report on the government’s supportive measures for the stock market, saying: “This year, which has been named the year of supporting production and eliminating obstacles, the government is trying to remove obstacles to the growth of the capital market and will try to encourage people to enter this market with the necessary training and arrangements.”

The government supports the capital market to direct liquidity into productive sectors and, in general, to de-centralize the economy and to help economic transparency, he said, adding that the government will continue to offer shares in state-owned enterprises and institutions in the capital market.

In its latest supportive decision, the government has approved to inject 240 trillion rials (about $5.7 billion) of resources into the market in the form of bonds which most experts evaluate as a positive measure. It is said that these funds are gradually injected into the market and help increase the liquidity until new resources enter the market.

It has been said that these resources that enter the market will also motivate shareholders, and therefore real investors will be encouraged to invest in the market.

In response to Rouhani’s remarks, stock market expert Amirali Amirbaqeri, believes that letting the supply and demand to determine the prices in the market is the most important support that the government can have for the capital market.

“The situation must develop in such a way that the country's economy can continue to live in real life based on the real forces of supply and demand,” Amirbaqeri stressed.

Stating that the government as a regulatory body is obligated to intervene in the market in certain circumstances, the expert said: these interventions should only be regarding the general issues and long-term outlook of the capital market.

In a healthy market, stock prices converge to the shares’ real value, and for this reason, the government should only facilitate this process and stop pre-ordered pricing for the shares related to some products such as steel.

"It should not be forgotten that the country is now in an economic war, and naturally various bodies such as the government and other institutions should act based on the country’s current situation,” Amirbaqeri said.

EF/MA

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