Iran's investors alarmed by stock market decline
Iran’s capital markets are in need of structural reform.
This week, another sharp drop in the Tehran Stock Exchange Index (TEPIX) served as a reminder that some of the structural issues in Iran’s main capital market need to be addressed.
Since the beginning of the current Iranian year (March 21, 2014) the TEPIX has dropped by 8% — a fact that has worried Iranian investors. Though this week’s sharp decline (2.5% drop on June 14-15) came to a halt on June 16, concerns remain that further fluctuations will undermine Iran's capital market. The most recent drop also indicates that the government’s April 2014 decision to inject some liquidity into the market was just a short-lived remedy that failed to address deeper structural shortcomings.
Market fluctuations are heavily influenced by domestic political and geopolitical events. The most recent such event has been the emerging threat from the terrorist organization the Islamic State of Iraq and al-Sham (ISIS). Interestingly, the Iranian market has calmed down following the start of a new round of nuclear negotiations in Vienna as well as the news that Iran and the United States may collaborate to contain the ISIS threat.
I wrote about the phenomenon last year for Al-Monitor and highlighted the need for structural reforms. Incidentally, when one looks beyond political events, news from Tehran suggests that officials are looking more closely at remedies to induce stability and reduce the negative impact of political uncertainties.
