Mohammad-Reza Pour-Ebrahimi, the Chairman of the Parliament's Economic Committee, has repeated the allegations that Tehran Stock Exchange (TSE) is "manipulated," furthering claims that the government of President Hassan Rouhani has manipulated the market and created a bubble the in TSE to augment its own budget deficit.
The government of President Hassan Rouhani is expected to have a large deficit due to the almost complete halt in oil exports stemming from crippling U.S. sanctions, Vice-President Mohammad-Baqer Nobakht said this week.
Pour-Ebrahimi, who was speaking on the state-run television channel IRIB on Friday, September 5, said some companies have artificially increased share prices by disseminating false information and misleading investors, though he did not specify which companies or entities were responsible for the manipulation of the market. According to Pour-Ebrahimi, many individuals have been misled into believing that they could make quick gains in the capital market and have sold all their belongings and even borrowed to make investments.
Economic analysts previously warned about the government's role in creating a bubble in the TSE. Gholam-Hossein Davani, a member of Iran's Chartered Accountants, was quoted by Sharq newspaper on Thursday as saying that the government is "directly responsible for the growth of the index and engineering the public opinion" to reduce the amount of liquidity and to augment its own budget.
The index of TSE does not reflect the realities of the Iranian economy, Davani said.
Due to the housing crisis, the industrial sector's recession, and widespread government propaganda to attract people's assets, many Iranians have rushed to the stock market in recent months. According to Davani, the freeze in the "tempting growth of the indices" has shocked many of these inexperienced investors who purchased over 870 billion rials worth of shares in recent months.
According to a Labor Ministry official quoted by IRNA, 63 percent of the earnings of Iranians come from bank interests on their savings, investment in gold and foreign currencies and real estate.
While the country is struggling with stagflation, quadrupling the total index in the first five months of the Iranian calendar year (starting March 21) meant quadrupling the value of mostly government-controlled companies' shares. During the same period the country's national currency, the rial, lost more than 40% of its value against foreign currencies. Experts and the media regarded such developments as surprising and suspicious.
The Tehran Stock Exchange index was around 500,000 units as late as in March, but aggressively climbed to more than two million points by early August without any economic fundamentals backing its rise.
However, the shares of many giant corporations and companies such as the Persian Gulf Petrochemical Company, Mobarakeh Steel and National Iranian Copper Industries that were sold by the government lost significant value in mid-August, and the overall index of the TSE fell sharply, despite Rouhani's efforts to instill optimism in people by claiming that "corrective fluctuations in the stock market are normal."