“Jittery” can best describe the market in January 2007. Anxiety over the impact of the sanctions, under United Nations’ Resolution1737, was prevalent among investors. This, coupled with a rise in sell orders by investors to realize quick gains following significant price hikes in some sectors over the last few months, drove the market into a virtual shock mode.
In two separate meetings representatives of over ten of the largest institutional investors active in the Tehran Stock Exchange tried to prevent further stock erosion by synchronizing their orders and gaining control of the market. However, concurrent heavy sell orders by smaller investors neutralized their concerted efforts. TSE indices fell further to the point where towards the end of January the average daily trading volume was below $10 million and on January 27 it hit its lowest figure of around $3 million. Just last December the average daily volume of trade on the market had registered figures of around $25 million. With the accelerated supply of stocks in most sectors it was only TSE imposed regulations and the exchange’s intervention policies that prevented heavier losses. The convergence of Moharram (a month of mourning for Shiites) was also a contributing factor to the decline in market activities during January.
The Metals Production sector was hit
hardest amongst the industrial sectors with its index falling by more than 5%
during January. The sudden fall in
the price of zinc in the world market to $3,500, together with the overall
market uncertainty in
The index for the petrochemical sector also witnessed a loss of 3%. This sector was hit not only by market anxiety but also because of the drastic decrease in global oil prices in January when prices touched the level of $50 a barrel. Consequently, the resulting risk of reduction in the price of their final products produced negative speculation regarding their future earnings.
Banking was one of the few sectors which remained particularly attractive in the month of January. The sector saw an impressive growth of 40% for its index this month. The three listed private banks benefited from the availability of liquidity in the economy and investors’ fear of higher risk investments given the current climate. This trend is expected to continue if there is no further reduction in government-imposed interest rates.
Overall, January 2007 was a difficult month for the TSE. The TSE Price Index (TEPIX) fell by around 0.73% from 10060 to 9987. However, one cannot ignore the impact of regulations imposed by the TSE board which minimize losses and gains during negative and positive climates.
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