The dominant narrative in Tehran is that the root cause of the market decline is the very slow economic growth, which is largely due to the credit crunch. A broker at the TSE trading floor told Al-Monitor on condition of anonymity that he believes that global oil prices are key to Iran’s economic growth.
The OPEC basket price currently stands at $35 per barrel, down from well over $100 per barrel in January 2013. Given the external pressures weighing on Iran’s crude exports and the current ban on the transfer of oil export proceeds back to the country, the government’s revenues considerably dropped in the two years running up to December 2015. The TSE broker told Al-Monitor that there doesn’t seem to be any light at the end of the tunnel. He said, “Capital markets will not get healthy in the short run — unless oil prices rebound.”
Indeed, cuts in annual budgets have decreased the number of development projects, reducing the demand for cement, steel, ceramics and other domestically produced building materials. For instance, SEO chief Fetanat says that demand for cement has halved, putting immense pressure on TSE-listed cement companies. In this vein, he suggests that the government should raise at least 1.5 trillion rials ($50 billion at the official exchange rate) in financing through the debt market in the coming Iranian fiscal year — beginning March 20 — to kick off more development projects in an effort to boost real growth.
Hence, as long as real growth in the gross domestic product remains elusive, neither sanctions relief nor a further drop in the rial’s value — nor even an expansionary monetary policy — will result in the revival of stock markets. Mindful that anticipated economic growth during the next Iranian calendar year will come from contributions made by exports of raw materials, investors are not likely to witness a boom in the stock market — at least not in the short run.