Sharp and sudden fluctuations in Tehran Stock Exchange

The main index of the Tehran Stock Exchange saw sharp fluctuations during last three days. On Jan.12, the TSE main index fell 2700 points compared to Saturday. That was unprecedented in the past five years. However, the index rose again on Monday.

The main index hit 85,000 points on Sunday, a 2.3 percent fall compared to the day before. But, it rose to 87,112 points and 87,640 points on Jan13-14, respectively.

According to the official website of the Tehran Stock Exchange, the TSE main index hit 250,000 points in the year 1390 (March 2011-March 2012), and it surged to 400,000 points last year. The interesting note is that the index has doubled in the current year and has passed 87,000 points, while other economic indices in Iran are in a very bad situation. For example, Iran's economy contracted by 5.8 percent last year, and is expected that it reach zero percent in the most optimistic case for current Iranian calendar year, which will end on March 19.

Different factors caused souring the TSE index during last three year, such as the great share of governmental companies in the stock market which enjoys the governmental supports and financial aids, and the shift in the flow of liquidity from industrial, banking, and housing sectors - which have been hit by recession - toward the stock market. Of course, there is a bubble in this market partly as well.

The plunge in TSE indexes during Jan.12, took place as a result of the government's decision to increase the price of gas which is supplied to petrochemical units, which will lead to a decline in their profitability. Petrochemical companies account for a great share in the stock market transactions.

Iran currently sells natural gas to petrochemical units at $30 per thousand cubic meters, which is 12-15 times less than the price of gas Iran exports to Turkey or imports from Turkmenistan.

As for the revival of TSE during last two days, statistics on the TSE website show that the automotive sector, the petrochemical sector, and the pharmaceutical sector have had the greatest shares in the rise of the TSE main index.

The restoration of the TSE index may be due to announced date for implementing the nuclear agreement between Iran and major powers on Jan.13.

The nuclear deal was achieved on November 24, 2013 and will take effect on January 20, based on which sanctions on Iran's petrochemical and automotive sectors will be lifted.

Dalga Khatinoglu    /Trend/