By Mahnaz Abdi

Capital market’s unprecedented growth in 2 years

June 19, 2021 - 16:29

TEHRAN- Over the past two years, a number of factors affecting Iranian economy have created a new status in the country’s capital market, in a way that this market experienced such a growth in the past Iranian calendar year 1399 (ended on March 20) that was never seen in its history of more than 50 years.

The fall in oil prices and the reimposition of the U.S. unilateral sanctions on Iran’s economy led the Iranian government to turn to the capital market for funding.

On one hand, the government tried to prevent liquidity from going to the markets such as gold and foreign currency, and on the other hand, considering the recent events in the Iranian economy, it also looks at this market with a view of financing, which resulted in the prosperity of this market.

The rising rate of inflation and also that of foreign currency exchange have been also mentioned as two major factors led to the flourishment of the capital market.

In addition to inflation, which has been one of the main drivers of capital market growth in the past two years, another market driver is changing the attitude of government officials towards the capital market and trying to transfer the shares of 18 large state-owned companies through exchange-traded funds (ETFs).

 Establishment of ETFs

In May, 2020, the government sold shares in three banks and two insurance companies via the first exchange-traded fund (dubbed Dara First).

Dara First, listed on Tehran Stock Exchange, which is Iran’s major stock exchange, was the first fund from a series of three ETFs, through them shares of some state-owned organizations and companies are planned to be offered.

The shares to be offered via the mentioned Iranian ETFs belong to those governmental bodies defined in Iran’s privatization program, a comprehensive plan seriously followed up by the government to downsize and reduce its role in the economy.

The second ETF (dubbed First Refinery, or Dara Second), which holds government shares in four major oil refining companies, was offered on August 26.

The government also plans to divest shares in giant auto and metal companies through a third ETF (dubbed Dara Third).

More initial public offerings

In line with the thriving status of the capital market, TSE held more initial public offerings (IPOs), some of them were related to some major entities.

On April 15, Iran’s stock market witnessed its largest-ever initial public offering, as Social Security Investment Company (SSIC, also known by its Persian acronym Shasta) offered eight billion shares, which account for 10 percent of its stakes, for sales in Tehran Stock Exchange.

In fact, the market is trying to attract the liquidity existing in the society toward production and development projects, so, many ministries and organizations including the Ministry of Transport and Urban Development announced that they are planning to fund their development projects through the stock market.

Public knowledge of capital market improved

While some economic factors such as reduced banking interest rate, and less profit-making status of the parallel markets including the markets of gold coin, forex, and housing led people to make investment in the capital market, their improved knowledge of this market was also a prominent factor contributing to the capital market’s flourishment.

Securities and Exchange Organization (SEO) have been taking some major steps in this regard to make people acquainted with the capital market and investment making in this market.

On Wednesday, SEO Head Mohammad-Ali Dehqan Dehnavi said that the capital market has witnessed many changes in the last two years, and in terms of size, volume of activity and presence of people, there has been a significant growth and these rapid changes have changed some equations.

The official also announced that the SEO’s Advisory Council has proposed two new programs for supporting the stock market in the current Iranian calendar year (started on March 21).

The mentioned programs dubbed "capital market policy package to support production and eliminate obstacles" and “the plan to improve the position and performance of the capital market" are supposed to expand investment making in the stock market, which can lead to the economic prosperity of society, through controlling liquidity, and even the optimal use of micro-savings.

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