Tuesday, July 26, 2005

Iran Tries to Stem Stock Market Plunge Over New President

AFP, The Peninsula:
Iranian authorities are trying to halt the downward plunge of Tehran's stock exchange, which has lost nearly six per cent of its value since the June 24 victory of ultraconservative president Mahmood Ahmadinejad.

"The stock exchange has dipped 5.9 per cent since the presidential election, which has raised many concerns, but this dip is not surprising," bourse chief Hossein Abdo Tabrizi was quoted as saying Wednesday in the Iranian press.

Since Ahmadinejad's shock election win, the Tehran Stock Exchange (TSE) has steadily dropped, marking gains on only two days since June 24. READ MORE

The trend began some months before the presidential election but gained momentum with the election of Ahmadinejad, whose promise to distribute wealth more evenly among the population frightened investors.

Of equal concern is uncertainty regarding international affairs.

Hardliner Ahmadinejad was elected with the reputation of being reluctant to compromise when it comes to the West. The outcome of Iran's negotiations with European countries on Tehran's nuclear preogram remains unclear, and the UN Security Council has threatened sanctions if they fail.

To try and reassure investors before he takes office on August 3, Ahmadinejad invited the head of the troubled bourse for a visit last Monday.

According to Tabrizi, Ahmadinejad told him his government "will do everything in its power to develop financial markets... support the development of the bourse... in order to allow more people to buy stocks and thereby boost the private sector."

Ahmadinejad also said his government will establish "a sweeping plan to distribute shares to Iranian families," adding the shares would be from state-run companies that must be privatised.

The president-elect said he favoured "consolidation of the bourse and an increase in the number of investors... at the same time as boosting the private sector through a reduction of quasi-state-run companies."

The meeting assuaged investors. On Wednesday the slide came to a halt and the bourse saw a gentle rise of 4.4 points. In contrast, the bourse lost 700 points to end at 11,730 on the day Ahmadinejad won the presidential race.

"Companies involved in leasing, investing and building suffered the greatest losses," Tabrizi said.

"There is a psychological climate that is leaning toward decline because all economic indexes, particularly the price of fuel and our hard currency reserves, are very good," he added.