Meanwhile, high interest rates for bank deposits are hanging over the stock market. In a bid to offset stock market losses or to cope with the pace of inflation, investors are fleeing to the safe haven of risk-free bank deposits and fixed-income instruments, including Islamic bonds — sukuk — and the newly debuted Islamic treasury bills.
Given the situation, listed companies are feeling the pinch amid a strongly bearish sentiment. Also, the global commodities glut has dramatically diminished listed companies’ earnings in Iran’s export-oriented stock market. “Investment companies and funds are deleveraging and money is moving from equities to fixed-income instruments,” Reza Soltanzadeh, CEO of Iran Industries Investment Company, told Al-Monitor:
Many state-owned commercial lenders are in an alarming state, as they hold high levels of toxic debt in their balance sheets. To replenish depleted resources, they have no choice except to lure investors with high interest rates, which can help them survive, Hossein Abdo Tabrizi, a member of the High Council of Exchange Market Representatives, told Al-Monitor. “Slashing the interest rate is a significant step to pique investors’ attention and send them back into the equity market,” Abdo Tabrizi said.
He further elaborated that pension funds used to be the chief liquidity providers in the equity market. However, they now experience more cash outflows than inflows, which is pressuring them to dump shares instead of shoring up portfolios.