Excitement in an Incomplete Market: The Stock Market After the Nuclear Agreement

In recent weeks, most analyses and notes published in the economic sections of Iranian media have focused on the issue of reducing bank interest rates and issuing directives to control prices. Meanwhile, the topic of Iran's economy in the post-sanction era and the achievement of the nuclear agreement has also been a point of interest for economic analysts. Below is a summary of several economic analyses and notes published in the economic pages of Iranian publications: Ali Dadpay, an economist and university professor, in a note he wrote for the newspaper 'Jahan San'at', likened the feelings of many Iranian economists to that of the 'watchman of the Titanic', stating that 'after years of warning about the consequences of unplanned execution and the costs of widespread disorganization in implementing the subsidy targeting program, they are now witnessing the reality of those warnings.' This economist declared the 'initial goal' of this program to be the 'elimination of indirect subsidies' which, according to him, 'led to the bloating of the country's bureaucracy and the inefficient allocation of public resources.' Ali Dadpay believes that the government at the time of implementing the subsidy targeting program 'ignored the inherent philosophy of subsidies and, considering the electoral slogan of bringing oil money to the people's table, implemented this program in the form of equal distribution of oil revenues.' According to this university professor, as a result of such an approach, 'a program that was designed to reform public finance and organize its components led to financial and monetary disorder.' In another part of his analysis, this economist states that 'mismanagement has led to an increase in the monetary base and consequently an increase in inflation.' At the end of his analysis, Ali Dadpay emphasized the need to correct the mistakes made in the implementation of the subsidy targeting program, asking, 'Can we remind the people that subsidies have never been and are not their dividends from the national wealth of oil, and from the beginning, some have tried to use this scheme and the national treasury to buy votes for themselves?' Shocking Directive Mohammad Mahdi Behnam, an economist and university professor, described the government's directive regarding a return to price controls as 'shocking' in a note published by the weekly 'Tejarat-e-Farda'. Mr. Behnam dedicates part of his analysis to affirming the government's performance in foreign policy and negotiations related to Iran's nuclear file, mentioning the reduction of inflation and exiting recession as commendable government achievements. At the same time, this university professor believes the government only has a few months to prepare for the post-sanction period. According to Mohammad Mahdi Behnam, 'to prevent price gouging, the government must pursue other avenues so as not to stifle competition.' This economist suggests that to combat rising prices, producers should be directed to produce at lower costs but with higher quality, which he believes can be achieved by eliminating cumbersome regulations. Mr. Behnam considers the recent government directive to be 'the biggest problem in the path to competitiveness' and hopes that the government will soon abolish this directive and restore 'economic logic to prices.' Excitement in an Incomplete Market Mahdi Heydari, a PhD student in finance at the Stockholm School of Economics, believes that 'the nuclear file has created a unique situation for the Tehran Stock Exchange that rarely occurs under normal conditions.' According to Mr. Heydari, 'under normal circumstances, predicting the future state of markets is largely symmetrical, whereas the current state of the Tehran stock market appears completely asymmetrical.' In this analysis published by the newspaper 'Donya-e-Eqtesad', this financial market expert emphasizes that 'the final agreement on the nuclear file will directly and in the short term alter the profitability of some listed companies.' This financial market analyst names 'transportation companies, banks and insurance, and automotive companies' as among the listed companies that will face changes in their stock price indices in the short term with the achievement of an agreement. Mahdi Heydari, in describing the state of the Tehran stock market in the post-agreement conditions, refers to the influx of new domestic and foreign investments, a reduction in overall market risk, and an increase in demand and prices in the stock market as changes in Iran's stock instruments following the agreement. This stock market expert further emphasizes that 'failure to reach an agreement will lead to a sharp decline in the market and a lack of investor interest in buying, at least in the short term.' According to Mahdi Heydari, overall, the likelihood of profitability in the stock market outweighs that of losses, but fear of a sharp decline, although unlikely, has caused cautious investors to exit the market. Mr. Heydari points out that the Iranian stock market is still far from being a complete market, and 'one of the solutions to prevent the stock market from experiencing emotional movements and sudden inflows and outflows of investors' is 'instead of advising calm, to provide the necessary tools for managing investors' risks.'