Tehran: Iran is considering a $300m financial bailout plan for companies listed on its weakened stock market, a newspaper reported, as share prices falter for businesses hurt by sagging oil and commodity prices. According to a report in the daily Kargozaaran, the chief of the Tehran Stock Exchange is pressing the government to put up cash to stop the collapse of the stock market, which has dropped to a five-year low since oil prices began plummeting this fall.
The newspaper revealed few details about the bailout plan, and no official could confirm the discussions between exchange chief Ali Saleh Abadi and President Mahmoud Ahmadinejad’s administration. Kargozaaran is close to the camp of former president Hashemi Rafsanjani, a relative moderate and Ahmadinejad rival.
The TEPIX, an index measuring the performance of Iranian companies on the stock market, has fallen below 8,700 from as high as 11,000 just two months ago. “Confidence in the market has dropped and the phobia of what may come has brought our stock market to a standstill,” said Mahmoud Sadri, 47, a writer for the World of Economics, an Iranian daily.
News of Iran’s financial woes could be music to the ears of Western policymakers who might hope that the global economic gloom exacerbates years of international sanctions on Tehran. Those measures are aimed at pressing Ahmadinejad’s government to end its nuclear enrichment program, which the United States and its allies fear could lead to the development of atomic weapons.
Iranian officials say that while the sanctions may weaken the country’s economy and hurt ordinary people, they will only harden the nation’s resolve to pursue nuclear technology. However, an ailing economy might hurt Ahmadinejad’s chances in the upcoming June elections, bolstering the prospects of more moderate factions.
Until recently Iranian officials boasted that the country’s economy and equity markets were unconnected to international markets and immune to the contagion plundering share prices and slowing economies throughout the world.
Despite the worldwide slowdown, economists estimate that the Iran’s oil-revenue-dependent economy will grow by 6 percent in this fiscal year, which ends in three months. But economists estimate that growth will slow to 3.5 percent during the next fiscal year. Fears of a long worldwide recession have precipitated a drop in commodity prices that is expected to hurt the bottom line of Iranian companies.
Most of the companies trading in Iran’s $300bn stock market deal in metals, petrochemicals, construction supplies, automobiles and energy—especially oil and gas, the lifeblood of Iran’s economy. “As oil prices dropped, it was clear the stock market would be affected because many companies in the stock market are receiving petrodollars,” said Saeed Laylaz, an economist.
