What effect does the removal of USD 4,200 have on the stock market?

According to Tejarat News, the Food and Drug Administration today published a list of the latest items to which the allocated currency has changed from preferential to semi-preferential. It is noteworthy that this organization has cut the currency of 4,200 Tomans for some drugs. An issue that is likely to affect the stock market.

Ali Assari, a stock market expert, said: “News has been published about the elimination of the preferred currency for a number of drugs.” We have a law in economics according to which a double exchange rate is harmful to the consumer and the goods usually reach the consumer at a high exchange rate.

He continued: “We conclude from this law that the nature of the two-currency is based on corruption and creates rents.” If preferred currency is not eliminated, mandatory pricing will continue, and this is a negative trend for the stock market.

“This will definitely have a positive effect on transactions,” Assari said. The elimination of the preferred currency may be inflationary in the short run, as according to the reports received now, the goods are bought and sold based on the free exchange rate and the 4,200 Toman currency goes into the pockets of the renters.

This expert clarified: the removal of 4200 Tomans is useful for the capital market in two ways. First, transparency of transactions and financial statements occurs. Naturally, when transparency occurs, the shareholder will have more confidence and can enter the market more easily.

He added: “Secondly, if the preferred currency is removed, the companies’ profit margins will increase in the financial statements, and this can have a positive effect on the stock market.” In general, removing the 4,200 Toman currency for any market would be bad for the stock market.

Read the most important stock market news on the Trade News page.