|
Stock Market Outlooks for 2009-10 |
During the past years, the stock market has suffered
from a series of structural, organizational, and environmental factors
part of which was transition from the old market law to the new law.
|
 |
|
Dr. Seyed Ahmad Mirmotahhari, Former
Secretary General of Tehran Stock Exchange |
The
current situation in Tehran Stock Exchange indicates that recession will
continue. Of course, serious downturn in prices during the second half of the
past Iranian year, has paved the way for a slight increase in stock prices at
the present juncture, but that growth is mostly because of general assembly
meetings in many companies during the first four months of the year. It is a
time for holding meetings and paying cash dividends.
Continuation of those meetings and announcement of new forecasts on stock
dividends may lead to another downturn in indexes. That is, starting in
summer, we may witness that downturn and reduced transactions on the market.
This will end in exclusion of real stockholders and more active presence of
semi-governmental investors. Therefore, despite rising indexes in past few
weeks, the market is not likely to get rid of recession in the first half of
the year and there is proof to show that the recession will continue. The
forthcoming presidential election and positions taken by candidates on the
stock market as well as viewpoints of the winning candidate can also trigger
ripples in the market causing temporary upturns or downturns in prices.
Cause of recession:
The
present recession in the stock market is also a result of the global financial
crisis and its consequences. On the one side, global recession has reduced oil
market profits for oil producing countries while, on the other side,
international price of many essential goods and metals has decreased. In Iran,
demand for commodities has taken a nosedive and many companies present in the
market are selling their products at low prices. This will reduce profit
margins of those companies followed by lower stock dividend. Lower stock
liquidity and reduced circulation of stocks are natural consequences of this
situation.
Therefore, the main reason behind the current circumstances in the stock
market is global economic recession and its impact on the Iranian economy.
However, it is not the whole story. Other factors in the Iranian economy and
inside the market also play a part.
During
the past years, the stock market has suffered from a series of structural,
organizational, and environmental factors part of which was transition from
the old market law to the new law. Apart from the weaknesses and strengths of
the new law, including the independence it has considered for capital market
vis-à-vis the money market and new facilities for building institutions and
new instruments, transition from the past law to the new one has brought some
ambiguity to the market. Part of that ambiguity was inevitable and cannot be
blamed on market management, but another part was due to hasty decisions,
which at times, stripped the market of necessary transparency.
Under
these circumstances, privatization is facing new challenges. On the one hand,
due to financial pressures and legal requirements, the government will have to
go on with privatization, but on the demand side, in view of recessionary
conditions in the market, it is quite natural that demand for stocks of
state-run entities would dampen. In this condition, stocks will be transferred
from governmental sector to a semi-governmental sector and public,
nongovernmental institutions are sure to play a more important part in
privatization. Therefore, under the current circumstances, realization of
budgetary goals of privatization does not seem probable. |
