Iranians incur heavy losses in stock market's sharp decline

By Behrouz Laregani


Tehran Stock Exchange in 2019. The TSE has witnessed constant fluctuations in recent months, notably the sharp decline of its index in late November, causing a large number of minority shareholders to incur major losses. [Photo via Borna News]

Iran's major stock market, the Tehran Stock Exchange (TSE), has been in decline since mid-November.

Its fluctuations during recent months, notably the sharp decline of its index in late November, have caused a large number of minority shareholders to incur major losses.

Hassan Zamani, a TSE expert, told Al-Mashareq that in the spring, the public was encouraged to invest in the stock market as a means to invigorate the economy which was suffering from crippling US sanctions.

Stocks did well, he said, "until the market suddenly lost nearly 45% of its value over the summer and a three-month slump ensued".

Zamani said a number of government-affiliated companies sold thousands of dollars in shares when stock prices were high, and after the market crashed by 45%, they bought shares at lower prices.

Meanwhile, ordinary people who had entered the market with little capital suffered major losses and now "we are getting government-affiliated Telegram messages as part of a publicity campaign to attract minority buyers to the stock market", he said.

'Bad host for public's capital'

Tasnim News quoted Iran's Majles representative Mohsen Alizadeh as saying, "The government was not a good host for the people's capital. People sold their belongings to enter the stock market, and now they are suffering."

Kazem Mousavi, another Majles member warned about a potential crash in the stock market over the summer, and said people "should not rely on stock market profits in the long term".

In response, however, government spokesperson Ali Rabiei said at the time that the government "protects people's assets in the stock market".

"Instead of directing free capital towards production, the government diverted it into the stock market and repeatedly encouraged the public to do so," economist Moloud Zahedi told Al-Mashareq.

She said the structure of Iran's economy in recent decades has shifted from supporting production to supporting imports of manufactured goods, so the infrastructure for production has not been updated, and in some cases is virtually nonexistent.

The Iranian economic daily Donya-ye Eqtesad reported on November 16th that concerns have prompted economists to closely observe stock market trades in upcoming weeks without making major predictions.

The report speculated that the recent downfall of stock prices is only a temporary fluctuation and some economists are hoping for an upward trend in the TSE's index.

According to the report, "the behaviour of real shareholders has a fundamental impact on maintaining the value of small stock transactions". The term "real shareholders" refers to major state-owned companies who lead Iran's stock market.

Some members of the public have speculated that the "big players" in the TSE possess inside trading information and some details about the status and future of certain funds and shares. They think their trading decisions are made based on insider information to which ordinary people do not have access.

About these rumors, Zahedi said: "This is not verified, nor is it necessarily verifiable, but there is some evidence to it, at least in certain cases. For example, some banking institutions affiliated with the Economy Ministry were practically bankrupt last year, but benefitted from the TSE's sharp fluctuations and are now in a stable position."

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