Iran is taking advantage of a stock market boom to boost state revenues by selling stakes in state companies, but risks political repercussions if those buying shares get burned.
While Iran’s already weak economy has been hit by the coronavirus crisis and an oil price slump, its stock market has risen 100 percent in local currency terms since March, encouraging many Iranians to seek higher returns than those available in cash.
Iran’s deteriorating economy, largely the result of sanctions re-imposed by the United States over Tehran’s nuclear program, has prompted widespread protests since late 2017.
Thousands of mainly lower middle-class Iranians took to the streets in November to demonstrate against a fuel price hike that plunged Iran into its biggest crisis since 1979.
In response, authorities said last month they planned to allow 49 million Iranians to trade so-called Justice Shares, a scheme launched in 2006 to hand heavily-discounted shares in state firms to people on lower incomes.
“The establishment is very well aware of all these economic hardships … and one of our concerns is the revival of protests like last year,” a senior government official, who asked not to be named, said. “The aim is to show people that the Islamic Republic cares about them.”
Justice Shares, which have a total value of around $19 billion at the free market rate, have given holders sporadic dividend payouts over years, but could not previously be sold.
Allowing holders to cash in gives them a one-off capital gain and increases liquidity in the stocks and the wider market.
Some officials fear investors are getting carried away.
“The government might be able to collect cash, but people will get poorer when the bubble bursts sooner or later,” a senior official at Iran’s Central Bank, speaking on condition of anonymity, told Reuters.
Ahmad Naderi, head of research institute and social studies at Tehran University who was elected as a member of parliament last year but has yet to be sworn in, said he feared a bubble that would burst.
“I am worried about its social and security consequences in the near future: riots bigger than 96,98 (2017,18) and definitely bigger than the 70’s,” he said on Twitter on May 6.
A Tehran Stock Exchange (TSE) spokesman denied there was a bubble in the country’s stock market. Iran’s economy ministry declined to comment.
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.