TEDPIX nosedived by 1,014.40 points or 1.28% to end the day's trade at a three-month low of 78,249.1. It was hovering safely above the 79,000 level for most of the day, when it suddenly plunged 30 minutes before market’s close.
Bank Mellat, the first of four banks to resume trading after a near seven-month hiatus, was the main reason behind the freefall. The bank’s shares dropped 37.51% to 1,206 rials per share, dragging down the benchmark by 853.55 points.
The other three banks, namely Saderat, Tejarat and Post Bank, have yet to open their symbols for trading after they froze in July.
Controversy began when it was disclosed that Bank Saderat, one of the biggest banks privatized in recent years, has incurred huge losses in the first half of the current fiscal year (March 20-September 20).
Soon, it became known that Saderat was only one of many lenders whose new balance sheets have sunk in the sea of red ink, prompting the Securities and Exchange Organization to suspend the shares of a number of banks from trading.
The next move came from CBI, which mandated the banks to prepare their financial statements based on International Financial Reporting Standards and barred them from holding shareholder meetings.
The suspended shares of the three major privatized banks Mellat, Saderat and Tejarat alone are worth more than 140 trillion rials ($3.39 billion), accounting for roughly 4% of the total value of the equity market.
Ali Khosroshahi, Amin Investment Bank's senior asset management and investment analyst, told Financial Tribune on phone it was high time that the banks’ shares had resumed trading.
“The whole process of adopting IFRS standards and restructuring balance sheets required a maximum of 2-3 months. In fact, the long wait was mostly due to the disharmony between CBI and SEO, and SEO’s struggle to minimize the damage of banks’ return,” he said.
Calling the restructuring of banks’ operations “a necessary surgery”, he said the market’s plunge is a harbinger of more such routs to come. Saderat, Tejarat and Post Bank’s eventual return to trading is expected to send shockwaves through TSE.
“This is a watershed for the banks,” said market analyst Ali Nikoogoftar. For years, banks were giving out dividends that had no real financial backing, since they were using unpaid loans and debts in their profit calculations. They ultimately had to change course and the market downturn was inevitable.
The market expert believes that SEO officials are expected to prevent further plunges by setting a cap for other banks’ trading upon their resumption. He also noted that TSE has gone through similar scenarios before, and it will take some time before banking shares can post gains, despite Iranian stock market’s unpredictable behavior.
This is while CBI analyst Pouya Jabal Ameli forecasts banking shares to be in the doldrums throughout their process of adopting new accounting standards, which he noted will take close to a year.
International Financial Reporting Standards is a single set of accounting standards, developed and maintained by the International Accounting Standards Board. These standards are capable of being applied on a globally consistent basis by developed, emerging and developing economies, and provide investors and other users of financial statements with the ability of comparing the financial performance of publicly listed companies on a like-for-like basis with their international peers.
IFRS standards are now mandated for use by more than 100 countries, including the European Union and by more than two-thirds of the G20 states.
TSE, IFB Tuesday Report
More than 1.17 billion shares valued at $47 million changed hands at TSE on Tuesday.
Bank Mellat incurred the biggest loss among all TSE-listed companies, as it went down 37.51% to 1,206 rials per share.
Toosgostar Urban Development Company was the biggest riser, going up 12.63% to 2,470 rials per share.
Bank Mellat weighed the most on TEDPIX, followed by Persian Gulf Petrochemical Industries Company and Parsian Oil and Gas Development Company.
SAIPA gave the biggest boost to the benchmark, followed by Iran Khodro and Iran Alloy Steel Company.
The Price Index lost 355 points or 1.28% to stand at 27,384.
The First Market Index was down 1,074.70 points or 1.90% to post 55,454.8.
The Second Market Index gave up 167 points or 0.10% to reach 167,014.
The Industry Index shed 143.30 points or 0.21% to register 66,675.6.
The Free Float Index went down by 1,372.14 points or 1.58% to close at 85,653.80.
The TSE 30 Index gave up 89.50 points or 2.75% to settle at 3,165.8 while the TSE 50 Index slid by 55.90 points or 1.78% to finish at 3,080.9.
The over-the-counter Iran Fara Bourse’s main index IFX lost 2.96 points or 0.45% to end Tuesday trade at 837.49.
Close to 140 million securities valued at $48.1 million were traded at the over-the-counter exchange.
Pegah Golpayegan Dairy Company saw the highest number of traded shares and trade value, as 12 million of its shares valued at $3.1 million changed hands.
Pegah Fars Dairy Company, Mavad Vizhe Lia Company and Tuka Paint Company showed the highest value increase.
Saman Insurance, Pasargad Insurance and Iranian Reinsurance registered the biggest decline.
Source: Financial Tribune