TEHRAN (Iran News) – The Iranian government said it will put aside one percent of the country’s sovereign wealth fund to stabilize the stock market which has fallen for consecutive sessions in recent weeks.
The capital injection was announced by government spokesman Ali Rabiei on Tuesday, Press TV reported.
Iran’s National Development Fund, a rainy-day fund, was established in 2011 to collect some of the proceeds from the country’s oil and gas industries for the benefit of future generations. The latest data on its size goes back to May 2016, when it was worth $80 billion.
Talking at a cabinet meeting on Wednesday, Iranian President Hassan Rouhani stressed that the stock market has its ups and downs and should not be looked at in the short term.
The president went on to say that the stock exchange officials should take care of the people’s capital.
Meanwhile, on the sidelines of the cabinet meeting, the head of the Presidential Office and Chief of Staff Mahmoud Vaezi told reporters that the stock market is not a short-term market.
He urged people not to get emotional in buying and selling shares.
The Tehran Stock Exchange’s overall index lost 3,564 points, to 1,546,446 within 20 minutes after opening on Wednesday.
It was down from a record high of 2,065,114 on August 9, when the government’s retreat on a decision to sell more state assets capped a months-long rally and sent the shares into a nosedive.
Authorities have embarked on a damage control campaign, trying to put a cushion under the market which has lost over a fifth of its value in a month.
The Tehran Stock Exchange has been harboring one of the top performing equity indices in the world, defying the coronavirus pandemic, the most aggressive US sanctions on Iran and an oil price rout.
Benchmark TSE index (TEDPIX) has surged more than 300 percent since the start of the year, riding high on a rally in steel, oil and petrochemical industries.
Among the oil companies, the Isfahan Oil Refining Company has grown 500 percent since the start of the year, while Tehran Oil Refining Company has soared 450 percent and Bandar Abbas Oil Refining Company up to 250 percent.
The surge has sparked fears that TEDPIX might be perched on a bubble that is going to explode over the heads of many ordinary investors.
Detractors have drawn analogies with Venezuela and Zimbabwe, where indices have surged more than 400 percent in local terms amid rising inflation and capital controls.
Others, however, believe comparing Iran to Venezuela and Zimbabwe is wrong.
Since 2017, the Trump administration has placed layer after layer of tough sanctions on Iran in an effort to deprive the country of financial resources.
However, far from collapsing, as American leaders had predicted, Iran’s economy keeps humming and is getting back on its feet.
“I think the predictions of a quick economic collapse were too optimistic,” according to Djavad Salehi-Isfahani, an economics professor at Virginia Tech specializing in the Iranian economy.
Despite the Trump administration’s most aggressive sanctions, there is “a misunderstanding of the level of complexity of Iran’s economy and how good they are or how experienced they are with resisting sanctions,” he told the non-profit media organization, NPR.
The Iranian economy is very diverse, with manufacturing being a key driver and one of the most important areas, which accounts for about one-fifth of overall employment.
It includes automobiles, metals and plastics. Iran is the Middle East’s biggest automaker and the auto industry in the country of some 83 million people keeps more than 60 other industries moving.
Its petrochemical plants have a capacity to make about 65 million tons of products a year, of which about 22.5 million tons is exported. The metals sector also includes a vast grouping of facilities, which generate billions of dollars in steel, aluminum, copper and iron industries.
While the US sanctions make it difficult to access goods needed to make products and find customers, Iranian businesses can stay afloat by tapping into the domestic and regional markets and using informal payment systems that do not rely on banks for trade.
Iran has already forged well-integrated relations with regional partners, through which it can barter, trade or use other types of arrangements to maintain economic activity.
“The Iranians really do have alternative industries to fall back on and a significant domestic capacity, as well as the ability to leverage their relationships with several of their neighboring states to try to muddle through economic adversity,” Suzanne Maloney, an Iran specialist at the Brookings Institution, told NPR.
“Countries like Iraq and Afghanistan, some of the Central Asian republics and, of course, Syria, elsewhere across the region — it does have a reach that goes beyond that of the US Treasury Department.”
Domestic producers are the top beneficiaries of the sanctions, because less imported goods have helped spur domestic production and that, in turn, has helped create more employment for Iranians.
Last year, leading American magazine The Atlantic summed up in a headline, “Why Trump’s Sanctions on Iran Aren’t Working.”
“They know how to get around sanctions and keep state and society afloat,” the publication said of the Iranians.
- source : Iran Daily