In the first two hours of trading on May 8th, the overall index of the Tehran Stock Exchange dropped 122,000 units to reach 2,317,000 units, experiencing its biggest decline in the 56-year history of the stock market.
Meanwhile, market experts cannot find a fundamental reason or explanation for this heavy fall, as 92 percent of the stock indexes showed a nosedive.
According to Iranian law, if the overall index of the stock market drops by more than five percent, trades on that day may be considered null and void. With the index dropping more than five percent on Monday and approximately 3.7 percent on Sunday, there are whispers of trade in the Tehran Stock Exchange being cancelled.
According to reports from the stock market, in only 20 minutes of the first trading on Monday, the total stock market index dropped 80,000 units and fell below the 2,400,000 mark.
Due to “emotional sentiment” overtaking the market, “shareholders are only thinking of an escape route” and that on Tuesday alone, “306.55 trillion rials” (approximately $67.68 million) exited the stock market, according to a report by the Tejarat News website, an economy-focused outlet.
Siamak Ghasemi, an economist, has called the administration of regime President Ebrahim Raisi the “most extreme” cabinet. In a tweet he referred to “the fastest drop in the rial/U.S. dollar exchange rate, the highest growth in liquidity, the highest historical inflation rate, and the largest historical fall of the stock market in a day”. “Iran’s economy is out of balance both in boom and in bust, and this imbalance has no economic solution, and everything is dependent on political decisions,” Ghasemi added.
Some analysts have said that incorrect management methods in the past and “market manipulation” have led to Iran experiencing “one of the worst performances in history” in its stock market.
According to Iran’s semi-official Borna news agency, the decline in the stock prices of heavy-weight shares in the second half of the trading day on Monday, due to the release of companies’ six-month financial statements, had a negative impact on the overall index.
The report also adds that various experts believe that the value of some companies’ shares on the stock exchange does not match their assets.
The relative decline in foreign exchange rates against the Iranian rial in the country’s free markets over the past week may also be another factor contributing to the decline in the overall index of the stock market.
Since last fall, the stock market index, already experiencing a downward trend, began to grow again. The total index rose from 1.27 million units in November to 2.5 million units this past Saturday.
Raisi’s administration and officials from the stock market have yet to explain what has happened in the past five months that led to the overall index of the stock market doubling.
The Tehran stock market had previously witnessed an unprecedented fall that began in early August 2020. The overall index was around 508,000 units on March 24, 2020, and passed the two-million-unit threshold on August 9, setting a historic record. However, it later entered a downward trend, and on March 18, 2021, the overall index of the market reached the level of 1.307 million units. The biggest nosedive in the stock market up to that time occurred on Monday, October 19, with a drop of 51,000 units, becoming known as Black Monday. In that year, the head of Securities and Exchange Organization changed three times.
According to some experts, what caused the stock market crash in 2020-2021 was the regime’s policy makers intervening in the trading mechanisms and turning it into an informal market. A similar chronology has been witnessed during the recent stock market decline.
“The problem with the Iranian market is systematic. When the overall economy is in crisis, the capital market will not be immune to it,” said Hamid Mir-Moeini, an economic expert, in remarks with Iran’s state media.