Tehran Stock Exchange Posted
FEAS Secretariat spoke with the CEO of Tehran Stock Exchange about the key strategic initiatives of TSE, financial literacy, technological development, COVID-19 impact, and more.
1. What are the key strategic initiatives TSE is working on at the moment?
As the largest exchange in the country, Tehran Stock Exchange is doing all efforts to apply updated technology and make operational processes improvement in order to increase its efficiency and effectiveness.
In the recent years, retailer have concentrated on TSE as a growth market and the investment hub. The local economic authorities are also considering the exchange as a sustainable and reliable financing source. As theses happen, it is crucial to be equipped with the latest know-how and provide new investment instruments and operational paradigms. Among TSE’s initiatives are launching the listing platform, corporates’ datacenter upgrading, members’ comprehensive development, complaints trailing system, Business Intelligence establishment, hedge funds formation feasibility study, and systemic risk management system implementation. TSE is now working on the improvement of market making operations to secure market’s liquidity and retail investors’ protection. At the moment, about 80 percent of daily trading at TSE is executed through on-line system, and investment funds take only 5 percent of the value. TSE would like to help the participants control sentiments and avoid herd-like behaviors and promote indirect investment through funds.
2. What is TSE’s role in promoting financial literacy in Tehran? Are there any significant achievements to mention?
One of TSE’s future outlooks is developing financial literacy and improving investment and shareholding culture in Iran by training programs and using media to reduce investment risks and increase transparency.
Therefore, investment development department has provided several plans including:
In our training courses topics are: 1- “introduction to capital market and how to invest in the exchange”, 2- “what you find in the capital market websites”, 3- mutual funds in the Iranian capital market, 4- investors right, 5- on line trading, and 6- new instruments.
Most participants in specialty sessions are brokers, and active investors.
In Our awareness programs, we give an introduction to Tehran Stock Exchange and participants are from high schools, universities, municipalities, and representatives from local entities.
A TSE’s achievements for the last year was training of more than 110,000 person/hour.
Since Coronavirus pandemic all courses are online.
Other activities of investment development department are: supporting research and holding conferences and publishing magazine, books and brochures.
3. Enhancing TSE’s brand and promoting transparency as the company’s image is part of TSE’s future outlook: what is done and what should be done in order to reach this objective?
Transparency is one of the corporate governance promotion outcomes and almost all companies has experienced transparency promotion after being listed. Exchanges are no exception on this. Many exchanges have been demutualized and some of them have gone farther and been self-listed. TSE has also taken to go down on this road and was demutualized in 2005, and became self-listed in 2016. Since then, the exchange has experienced improvements in corporate governance and managerial structure, higher efficacy and cost efficiency, as well as upgrading infrastructures. In addition, TSE has to meet all the requirements for listed companies including disseminating financial statements on a regular basis and compliancy with the rules and regulations and holding press conferences aiming to promote financial and operational transparency.
4. This year Iranian stock market holds its largest-ever IPO at Tehran Stock Exchange. How is TSE maintaining the relationship between the stock exchange and listed companies during the global pandemic?
Most of our relations and correspondences with listed companies are currently on-line and virtual. TSE holds e-meetings and receives IPO documents via listing application system.
Just in special and important cases like listing board meetings, TSE holds face to face meetings by complying with all safety and health protocols.
Steps for reviewing IPO documents are as follows:
The applicant sends online listing request letter along with financial statements to TSE. Listing experts review documents and if listing criteria are met, the process is continued; if not a rejection letter is sent to applicant for another round of processes. Webinars are held if clarifications and explanations are needed. Documents are uploaded in TSE’s listing application and members of listing board, operating manger, listing manager and authorized experts have access to this application. They can upload their opinions, questions, and answers in each stage going ahead.
5. Recently, trading activities in Iranian capital market are more than significant: huge amount of new, first-time investors, index ups and downs, market response, and high demand. Will you, please, tell about the situation in the market for recent months and now?
The total equity return since the beginning of the year is 232%, which shows a growth of 513,000 units of the broad index.
This is while the total weighted index return has had 143% return.
The stock market’s trading volume exceeded 1,000 billion equity shares in the first 6 months of the current Iranian year, with 126 percent increase than the same period last year.
It is worth mentioning that the derivatives market and the market of tradable funds (ETFs) have been associated with 99% and 353% growth, respectively, compared to the last year.
The value of stock market transactions in the first six months of the current year reached more than IRR 13,000 trillion, which has increased by 901% compared to the same period last year.
Also, the market value of derivatives and ETFs increased by 1,225% and 614%, respectively.
It should be noted that the market value has been associated with 242% growth since the beginning of the year and has reached the value of IRR 61,000 trillion.
In this year, the number of stock market transactions has increased from 39 million times to 203 million times and has experienced a growth of 418%.
There are 294 open trading symbols and 52 halted symbols, which indicates that 85% of the companies are active in the market and 15% of the symbols are closed due to technical and transparency issues.
The average number of traders per day was equal to 205,791 and the highest number of traders in one day, which was dated on 29 July 2020, was more than 7 million people.
The cash dividend ratio was 60% and the price-to-earnings ratio was 36.3.
In the first half of the current year, 8 companies were initially listed. Also, 6 companies have been transferred from OTC to Tehran Stock Exchange (TSE).
While comparing the markets, in the Iranian capital market, TSE accounts for 64% of the accumulated value of transactions.
In the Middle East, TSE has the most significant changes in its index among the selected stock exchanges, followed by Dubai, Saudi, and Istanbul stock exchanges.
48% of the financing on the stock exchange has been from initial public offerings (IPOs) and 43% from capital increase (except re-evaluation) in the period.
On the buyer side, the purchase value of retail shareholders was 73% and that of institutional ones was 27%.
On the sell side, the value associated with institutions is equal to 72% and that of individual shareholders is 28%.
6. In your personal opinion, what will life look like after COVID-19 pandemic? What are the major challenges that humanity will face in the near future?
The crisis was expected, but not its scale. It was surprising and informative. The pandemic revealed that human being is severely vulnerable despite scientific and technological achievements. Also, with the spread of protectionism and fall of globalization, the virus reminded how people of different races, social and educational classes may come to each other’s’ help with further equality in the agenda. In spite of the pandemic’s ethical and social lessons, its long-term economic disturbance will be significant. Some predict a gradual and prudent return to normalcy, however, with the virus footprints in our minds, there will be more tendency for saving than consuming in the future, and this makes the recession recovery longer. Then, it can be expected that even after the pandemic, the global economy will start growing with the past rates after some lag time.
The businesses are also disrupted with mandatory remote-working, with both pros and cons, regarding the staff availability and efficiency, as well as the cost savings in larger enterprises due to limited attendance of people in the offices or work spaces. It is estimated that tech-reliant occupations will continue thriving, and the next step will be how to adapt your business with that.