The double effect of dollar price on listed companies / feed rate formula should be corrected

According to Tejarat News, since November of this year, when the price of the free dollar started its fast upward path, the capital market has faced a new movement. During this period, the total stock market index was able to get out of the deep recession and return to the cycle of capitalization. However, this market is still facing many challenges, including the exchange rate, the feed formula of petrochemicals, the situation of the commodity exchange against rent seekers, and the mistrust of shareholders.

Maysam Fadaei, the former CEO of Fara Exchange and the current CEO of Damavand Capital Financing Company, sat down to talk with Tejarat News about the state of the capital market and analyzed these challenges. In the first part of this interview, he discussed the effect of the dollar price on the capital market and then he analyzed the situation of market companies with regard to variables such as the feed rate. In this conversation, the situation of the commodity exchange is also discussed in front of the advocates of mandatory pricing, which you will read below.

The mechanism of impact of the dollar on the stock market

In recent weeks, we have seen the increase in the price of the dollar in the open market; Even now that the dollar has started a downward trend, it has not yet returned to the channels of the previous months. Based on previous experience, the stock market is affected by the increase in the price of the dollar, but by what mechanism and in which groups does this effect occur?

An increase in the exchange rate can affect the Iranian stock market in two ways; First, by increasing the asset value of listed companies, and secondly, by changing the status of commodity-oriented companies. Most of the listed companies are asset-oriented and have a lot of real estate; When the exchange rate rises, as a result, the tangible assets of companies are reviewed and the possibility of increasing capital from the revaluation of assets increases.

On the other hand, some companies are export-oriented and commodity-oriented; Most of the petrochemical companies are in this group that sell or export their products through the commodity exchange; As a result, when the exchange rate increases, as a result, the selling price of the products adjusts itself with the increase of the exchange rate with a time lag, and finally the companies are affected in terms of profitability. Therefore, the increase in the exchange rate has a double effect on the stock market, and export-oriented and asset-oriented companies are affected by the increase in the exchange rate.

Importance of currency price for the capital market

For some time, the currency obtained from the export of companies has been contested in the second market of Nima and the price is discovered; Accordingly, it is no longer necessary for exporting companies to sell their currency for 28,500 Tomans; What effect does this change have on the capital market?

The recent transactions of petrochemical companies in the exchange room show that it is true that the real exchange rate is determined in the currency exchange market and the supply and demand in that room determines the main exchange rate in the country, but the same exchange rate adjusts itself little by little. And when this adjustment happens in the trading room, it will improve the profitability of petrochemical and steel companies that export.

Can we say that a single stock or a certain industry is growing in the market?

Depending on the product it produces, the single share may take a certain trend; Some products in the world markets are at a reasonable price and therefore have the possibility of growth, but some products have a high price.

Not long ago, the National Copper Company had announced its currency exchange rate of 45 thousand tomans, which of course was canceled. On the other hand, different figures were announced for the exchange rate in the budget; A disagreement that repeats itself every year. What number do you think is suitable for the exchange rate of capital market companies and makes their financial statements more realistic?

There is a misconception that the government says we give cheap fuel and feed to the petrochemical companies and therefore can decide the prices. The point here is that in the first place, the petrochemical feed formula should be modified and be suitable to the competitive conditions. Because we are in a region where many neighboring countries have oil and petrochemical companies, the conditions created for the companies must be competitive.

If these conditions are competitive, and on the other hand, in the currency and gold exchange room, supply and demand are done in a real way and without command pricing, the rate discovered there is a reliable and respectable rate. But if this is not the case and we have to give in to a price gap between the currency of basic goods and the free market, like the 4200 Toman currency, in the long term it is not possible to continue this process and rent will be created, which will have a detrimental effect on the economy.

This year, the Parliament has removed the industrial feed rate from the budget and entrusted its determination to the Council of Ministers. Is this procedure change in favor of industries? What is the optimal way to determine the feed rate and end this challenge every year?

The important issue regarding the feed rate is the “formula”, whether this formula is fair or not. Now, the hobby rate is in the formula, which is not competitive at all and has nothing to do with this region and the economy. So the first point is that the formula must be modified; Once the formula is modified, setting the price ceiling is no longer challenging.

If we want to put everyone’s mind at ease, we must specify the formula so that the analyst can analyze with a real and specific price; Not to wait for circulars and notices, for example, what is the price of gas in spring. A modified and specific formula with regional competitiveness conditions is better than the two modes.

This year, the commodity exchange faced new pressures. During the release of cars in this market, powerful lobbies were activated against transparent car deals in the stock market; Some even went so far as to discuss the liquidation of the commodity exchange under the pretext of selling products of petrochemical companies and currency price fluctuations; A process that had happened before in the case of cement, but it had not reached the discussion of liquidation; Will the continuation of these pressures destroy the stock market?

Liquidation of the commodity exchange is not possible at all. All over the world, advanced economies have followed a path that we will follow a similar path according to the conditions of our country. Commodity derivatives are traded in the world’s stock exchanges, such as the London Stock Exchange.

The discussion of liquidation, like many decisions such as the currency of 4200 Tomans, cannot be implemented in the long term; The liquidation of the commodity exchange is not possible at all! Many products, such as petrochemical products and cement, are traded on the stock exchange without any problems. Regarding cars, a lot of efforts have been made in the commodity exchange and they are improving the supply models.

The second part of this report, which deals with the prediction of the stock market in the next year, will be published soon.

Read more reports on the stock news page.