Reducing capital market ambiguities / two important scenarios facing the stock market

According to Tejarat News, the stock market witnessed positive signals from the government after going through negative days on Wednesday. Five resolutions were announced in order to reduce the ambiguities of the capital market, which, if implemented, can be expected to improve the stock market situation.

Javad Fallahian, a stock market expert, said: “According to the decisions made by the government’s economic coordination headquarters, five resolutions were announced to the market, which could reduce the economic ambiguities ahead.” The market downturn was largely due to uncertainties that threatened the economy in the future.

He continued: “These ambiguities caused some people to leave the stock market despite inflicting heavy losses.” In the review of recent approvals, we see that in petrochemical feed, fuel consumption of steel mills and gas fuel rate of steel were adjusted. The feed rate was set at 5000 Tomans, the steel rate was set at 40% of the 2000 USD ceiling and the cement rate was set at 10%. This reduces the risks imposed on petrochemical companies.

Fallahian added: “On the other hand, in the discussion of selling securities, it was approved that the sale to fixed income funds should be at least 50% of the cash inflow, which is a factor to prevent the outflow of liquidity from the stock market as much as possible.” The exchange rate of foreign assets of banks and non-bank credit institutions was set at 90% of the exchange rate of the Nima system, which has a great impact on the banking industry and also the reduction of interbank interest rates. Given that interest rates act as leverage in financial markets, lowering them has a positive effect on the market.

Rationality goes back to the stock market?

“Given these issues, we can not say for sure whether the market will return to the previous trend or rise,” said the stock market expert. Unfortunately, the fear and capital flight we had from the market is too much and the trust we lost is not easily restored. Next week, the petrochemical and banking industries are expected to be supported by large funds and companies. If this support continues, trust will return to the market.

“There are currently two scenarios for the stock market,” Fallahian said. The first is that purchases by legal entities and large companies continue and a positive trend returns to the market. The next scenario is that, unfortunately, market fears continue to overwhelm potential purchases and push stock prices to the negative and sell-off line, which, if this happens, will see more falls than before.

He added: “According to recent approvals, the first scenario is more likely to be realized.” But analyzes in recent months have shown that the market does not react significantly to positive news, similar to the market reaction to positive reports from companies. With these interpretations, we hope to see rationality in the stock market next week, given the reduction of budget and economic ambiguities.

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