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Tehran's Booming Stock Market Begins To Run Out Of Steam

Iranian men monitor the stock market at the stock exchange in the capital Tehran, August2018. FILE PHOTO

Despite a drop of more than 90,000 points in the Tehran Stock Exchange (TSE) index in the past few days, the CEO of TSE announced that investors have not withdrawn funds from the stock market.

In early trading on May 16, the TSE's benchmark TEDPIX index lost more than 32,000 points, falling well below one million points. Last Tuesday and Wednesday, it also dropped and returned to below one million with a decrease of 30,000 points each day. In the last trading days, the market has lost close to 9 percent.

However, the Director-General of the TSE, Ali Sahraei, said investors were waiting to buy stocks at better prices.

"As the stock market index is booming, it is natural for some to identify opportunities to make profit, take advantage and sell their stocks after pocketing gains," Sahraei said.

Meanwhile, he denied reports that the TSE was experiencing a bubble. However, in the past one year, TSE index has risen close to 200 percent amid a deep economic recession and a grim outlook for the country’s economy battered by U.S. sanctions and an almost total loss of oil exports.

One reason for the steady rise in Tehran’s stock market is lack of other profit-making investments amid the recession and the governments discounted offering of state-owned companies.

Citing a capital market expert, Alireza Tajbar, the Islamic Republic's official news agency, IRNA, reports that the market's current negative trend will not continue much, and the stock market index soon will return to its original trend after a 10% correction.

The total index of the TSE registered 1.02 million points on May 9.

Nevertheless, in a note for Radio Farda, Paris-based Iranian economist Jamshid Asadi argued on May 8 that the current rise in the market has created a typical bubble.

"As long as the government increases the volume of trade by privatizing more public companies and raises the stock market index, it can postpone the bubble burst", Asadi wrote.

Another Paris-based Iranian economist Professor Fereydoun Khavand has also warned in a note that the current state of capital attraction in the TSE is a dangerous game played with government support.

Many more experts have warned in recent days of the consequences of "millions of people, often inexperienced" deciding to flock to the stock market.

Meanwhile, the head of Iran's Stock Exchange and Securities Organization called on the people to invest only their "surplus" money in the stock market and not to risk money they need for necessities.