Farzin’s shock to the stock market / is the concern of the capital market reasonable? – Tejarat News
According to Tejarat News, it was last week that the Commodity Exchange announced that the calculation exchange rate for determining the base price of the products offered in this market can vary between the nominal and agreed exchange rates. A resolution that increased the confusion for calculating the profits and losses of companies.
Although the Commodity Exchange has made the implementation of this resolution subject to the assignment in the market regulation headquarters, other new risks quickly took hold of the capital market. Today, most of the market symbols were faced with an increase in supply and the total index collapsed by more than 56 thousand units.
At the same time, the equal weight index, which shows the status of small and medium market symbols, faced a heavy drop of 11,000 units. Today, the withdrawal of real money intensified and more than 800 billion Tomans were withdrawn from the capital market.
Why did the market collapse?
But why did the market experience such a heavy fall when the capital market recently experienced a resurgence and market players managed to slightly increase the value of transactions after months of stagnation?
It was on Thursday that the news came that the head of the central bank has changed and the helm of monetary policy has fallen to Mohammadreza Farzin. This news was enough to revive the nightmare of interbank interest rates for the people of the capital market. Because, as it was proved later, Farzin believes in the policy of interest rate increase, and accordingly, a negative signal was sent to the stock market before the implementation of this hypothesis.
Although in the meantime, some economic observers believe that this policy can appear in the long run by reducing the inflation rate in favor of the economy, but the stock exchanges believe that the increase in the interest rate will lower the production efficiency and the result will be pressure on the companies.
However, the capital market received the main blow from the stabilization of the half dollar rate at the price of 28,500 tomans; The price, which is now known as Farzin dollar, has created many buts and ifs for the calculation of companies’ profits and losses.
Confusion of market players
Although in advanced economies, central banks, independent of governments and regardless of political changes, announce the perspective of monetary policies for the short, medium and long term so that economic activists can draw their roadmap based on it, but in Iran, always with the change of managers , all policies are transformed at once and show their effect quickly in economic activity.
Now, the head of the central bank has changed, and the monetary policies are going to change as well; The capital market reacted quickly to these changes and even Majid Eshghi, the head of the stock exchange organization, has stated that he will defend the interests of shareholders in negotiations with the central bank. But the question is, to what extent are these concerns among the people of the market reasonable?
Dominance of the stability perspective
Homayoun Darabi, an expert on financial markets, said in an interview with Tejarat News: “There is a misconception in the Iranian economy that considers the exchange rate to be the factor and believes that a change in the exchange rate brings inflation.” That’s why this view focuses on the control of the exchange rate and considers the success or failure of the central bank governors to be the exchange rate issue.
He added: “This is while we all know that the exchange rate is a handicap; That is, if you control inflation, the value of the national currency will definitely not decrease, and if you cannot control inflation, the value of the national currency will decrease! The change of Mr. Salehabadi is in line with the first premise that they blame him for the devaluation of the Rial to some extent and change the head of the Central Bank with a stabilization perspective that we have seen many times in recent years.”
Darabi states: “We have seen this point of view before in the courses of Mr. Hemti, Saif and Salehabadi and we have experienced the 1226 Toman currency and the 4200 Toman currency; Now the 28 thousand and 500 tomans dollar that Mr. Farzin says is in line with the same view that they believe that the exchange rate is the factor and if we can control this rate, the problems will be greatly reduced.”
Repetition of the currency policy of 4200 Tomans
This financial markets expert said: “This is a challenging issue. What Mr. Farzin said and the market reacted to it today is the same as the currency of 4200 Tomans, but this time it is several times more and the result will be the same as the currency of 4200 Tomans. “Everyone knows this, but unfortunately, we are seeing it happen again.”
Darabi added: “The market is currently reacting because it is worried about whether stock exchange companies will be obliged to sell their currency at this low price; You know that listed companies export a small amount with great difficulty, and when we look at the company level, because the interest rate has increased, wages have increased, and the price of domestic raw materials has also increased along with the growth of inflation, if they want to produce under these conditions It is not affordable at all; Especially if they export it with difficulty, but in the end convert it to Rials with 28,500 dollars.
He added: “This trend is actually export orders with a very low profit margin, which our companies do not do; At least until October, we had a trade balance deficit of 6 billion dollars, and this trade balance was due to the Nima rate or a rate lower than the free market; Now, if we want Nima to find more distance from the free market, both exports will be lost and our companies will not want to export! This means that exports will no longer be attractive, and thus the trade balance deficit will increase.”
Darabi stated: “This process, on the other hand, will increase the price of the dollar in the open market to create a strange gap like what happened in the case of the 4200 Toman currency. Then again, we will witness the same inflationary jump caused by the change of Nima currency in the economy.”
Capital market behavior
This financial market expert continued: “Currently, since the market has had this experience several times, it is adapting itself to the past experience and does not think that this time will result in a different result!” That’s why he is probably doing the same thing he did with the 4200 Toman currency.”
Darabi added: “Of course, I am unlikely that the current downward trend will continue continuously in the market; “We have to wait until more details of the central bank’s policies in the field of currency and interest rates are determined.”
He said: “Mr. Farzin’s speeches did not include a coherent and transparent policy. Obviously, for example, they had no idea about the organized currency market, what it is doing now, or how they want to control the senate rate or the banknote rate, or what is going to happen in the free market!”
Darabi stated: “If there are uncertainties and there is no heavy supply from the central bank, and if the traders who are holding hands now see whether they will be allocated currency in the Nima market and do not reach a conclusion, then we will again put an upward pressure on We will have dollars. For now, everything is on hold and we are waiting to see what the next card will be on the table.”
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