Iran fears capital flight after ultra-conservative victory

Iran Focus: Tehran, Jun. 26 – Iran’s financial markets reacted negatively to the election of ultra-conservative Mahmoud Ahmadinejad as President, raising fears of capital flight and massive sell-off. “We have faced a lot of uncertainty in the past few weeks”, Hossein Abdoh-Tabrizi, chairman of the Tehran Stock Exchange (TSE), said in a telephone interview. Iran Focus

Tehran, Jun. 26 – Iran’s financial markets reacted negatively to the election of ultra-conservative Mahmoud Ahmadinejad as President, raising fears of capital flight and massive sell-off.

“We have faced a lot of uncertainty in the past few weeks”, Hossein Abdoh-Tabrizi, chairman of the Tehran Stock Exchange (TSE), said in a telephone interview. “The markets have reacted negatively, but we hope this is going to be a temporary phenomenon”.

The TSE index lost a record 126 points on Saturday in reaction to news of Ahmadinejad’s victory.

“The recent instability in the capital market is due to psychological factors”, Haidar Mostakhdemin Hosseini, Iran’s deputy Minister of Economy and Finance, said on Saturday.

Ahmadinejad sent shockwaves among investors when he said in a speech, “Stock market activities count as a form of gambling, and Islam has banned gambling”.

Harsh attacks by Ahmadinejad and his close allies on free-market economy, campaign speeches filled with references to “bloodsucking entrepreneurs” and “daylight robbery by profiteers”, and promises of a more ideological approach to foreign investment and relations with the West have frightened the indigenous business community and the dwindling ranks of foreign investors.

A key ally of Ahmadinejad lambasted traders and the stock exchange for “creating fluctuations by making mischief”.

“The stock market fluctuations are the aftershocks of the great earthquake that was created by the will of the people”, Mohammad Khoshchehreh, a senior official of Ahmadinejad’s ultra-conservative grouping, Abadgaran, said.

“Those who are making mischief and causing fluctuations in the market must give up and join the people”, Khoshchehreh, widely regarded as the top economic adviser to the new President, said in a threatening tone that is likely to exacerbate market jitters in Iran.

Khoshchehreh, who sits on the Economic Affairs Committee of the Iranian parliament, warned businessmen against “hatching a plot” against the new President.

“The actions of those who are making mischief in the stock market will not be forgiven. The Ministry of Intelligence and Security [Iran’s dreaded secret police”> must investigate the evil activities of political gangs in the stock market”, he said.

Khoshchehreh said there was a “considerable amount of insider trading” and vowed that the new government would “clean up the financial markets”.