Putting Rates in Line
One of the major issues in the recent decades has been the actual lowering of interest rates, which used to hit the 2-digit inflation problem and fail. As has been mentioned here repeatedly, the inflation ratio was put on a descending trend since the 11th administration took office and reached from 35% in 2013 to below 10% in 2017; despite being considered as a success, it has not managed to drag the interest rate down, based on the common belief that this rate must be in line with the inflation rate.
The problem seems to lie in the fact that the inflation rate which has the potential to affect the interest rate is not the current inflation rate; rather it is the future inflation or inflationary expectations in the economy which will define its directions. Unfortunately, the acting administration has failed in curbing such expectations and economic practitioners believe that the current rate will be temporary and unstable. This might raise the question why.
Experts assume that because Iran’s economy has been grappling with 20% inflation during many years, practitioners need to be assured that this lower inflation rate accomplishment will be kept at least for a couple of years in order to gain their trust.
Those experts also believe that fundamental reasons causing such high rates must be addressed at the same time; they think that a part of such an event arises from the government’s attempt to keep the foreign exchange nominal value away from inflationary effects while they have to gradually adjust it with the inflation rate, which itself calls for the unification of foreign currency using the open market mechanism; if accompanied by organizing as well as deepening the debt market, despite adding a little to the current inflation rate, the final result will lower the inflationary expectations and eventually lead to the real decrease in interest rate.
In the Market
As was said before, trading value and volume has been light ahead of the 2 day holiday early next week. Companies listed on the Metals group went through positive trades with names like Yazd Alloys Steel and Shahid Bahonar Copper going up more than 4%
The Iron Ore space witnessed a rather similar trend led by Mines and Metals Development (0.97%) and Saba Nour Mineral and Industrial Development (2.25%), although Bafq Mines was the only one shedding the most (-3.5%).
Oil global prices dropped owing to an increase in production by Libya, pushing the majority of names in the Oil Products group into the red zone. Today, 13.73 mn and 2.59 mn shares of Tabriz Oil Refining and Iranol Oil were block traded in the retail market at +4.64% and -0.61%, respectively.
As the only name in the Communication sector, Atie Data Processing was faced with a buy queue during the session.
In comparison with the few past sessions, names in the Automotive industry went through more positive trades; it seems that the more we are approaching the probable reopening of Saipa ticker (although not set), the higher demand is seen among names. Although Iran Khodro ended in -0.6% territory, Pars Khodro and Zamyad finished in the green 1.82% and 0.6% higher, respectively.
Despite their whole green space in the past 2 trading actions, except from a few symbols in the Sugar sector, including Qazvin Sugar (-1.03%), Esfahan Sugar (-1.12%) and Shahroud Sugar (-1.13%) which witnessed a drop, other like Shahd, Lorestan Sugar, Shirin Khorasan Sugar and Piranshahr Food and Sugar grew up by more than 4%; Shahd has benefited its shareholders with a 34% return during the past month.
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