Market Business in the Corona era by Vahid Motaghi

  • 15-January-2022

Corona outbreak, in addition to its effect on supply and aggregate demand in the Iranian economy, also puts mutual pressure on the 1399 budget, ie pressure on costs as well as pressure on revenues, since the decline in demand due to the outbreak of the virus  Corona affects listed companies and businesses and reduces production.  Therefore, the government's ability to tax taxes on production and businesses will decrease, and tax revenues will decrease.  On the other hand, the costs of dealing with the corona as well as the reduction of oil and tax revenues led to an intensification of the budget deficit, and the provision of this amount in turn leads to increased liquidity and, consequently, high inflation in 1399, which has an effect on the capital market.  And parallel markets are undeniable.  It is the growth of liquidity and monetary base and the reduction of real interest rates that have fueled the fluctuations and excitement of the stock market and sent a huge amount of liquidity to the stock market so that the capital market can see multiplication of stock market indices.  In such a situation, investors seek to maintain the value of their money and at the same time make a profit in the existing markets.

(Traditional investment and stock market investment by Vahid Motaghi)

Traditional investment options such as housing, gold, dollars, bank deposits and bonds are also considered in addition to investing in the stock market.  But in these circumstances, the market that could initially attract more investors was the stock market, because in 1398 the dividend of shares of many listed companies was higher than the interest on bank deposits and bonds, along with profits.  On an annual basis, shareholders also benefited from the increase in the value of their shares due to inflation.  Of course, it is important to note that a large portion of these dividends were actually spent on raising capital.  These two factors, along with the relative stagnation in other markets and the inflationary conditions of the economy, made the stock market one of the most attractive markets for investment.  Especially in the context of Corona and with the publication of a lot of news on social networks about the multiplication of the value of many shares, it caused the middle section of society to gradually have the necessary leisure and close some businesses and part-time students and employees and despite  Cyberspace and the online trading system of the stock exchange and most importantly to maintain the value of your money and make a profit

To invest in the stock market.  Thus, cash flow from many other markets was directed to the stock market.  The influx of liquidity from the middle and rich class and even part of the poor class into the stock market upset the balance of supply and demand in this market and caused further growth of companies' stock prices due to high demand, while increasing stock prices in turn  It makes the stock market more attractive and encourages more people to enter and invest in the stock market.  In fact, a vicious incremental cycle was formed with three factors: investors' flower behavior, liquidity and stock prices.  The influx of large amounts of liquidity into the Tehran Stock Exchange and the increase in demand for stock purchases caused the ratio of stock market value to total liquidity as well as the ratio of stock market value to GDP to increase.  Of course, the role of government support and the role of private companies in this increase can not be ignored.  Government and private institutions are not only present on the stock market, but also on the demand side, a large part of the market liquidity is at the disposal of these institutions and individuals under their supervision, which of course the future of the Iranian stock market significantly depends on the future behavior of this  Institutions depend.

(The role of private companies and government institutions and government according to Vahid Mottaqi in both supply and demand)

Undoubtedly, the government and government institutions and private companies, as the largest players in both supply and demand, have the greatest role in the market movement.  Also, these institutions have the ability to direct the behavior of investors due to access to media and social networks.  The key issue here is that the government faces a large budget deficit and views the stock market as one of the main sources of compensation for the budget deficit.  In fact, the best-case scenario for the government is for the stock prices of state-owned companies to rise on the stock exchange, and for the government to earn a substantial income by transferring part of the shares of these companies while retaining ownership of these companies.  More importantly, the government, backed by the vast resources at its disposal, supports the stocks of listed companies in which the government is a shareholder in the market, which is why in the first months of the year, the stock prices of many of these companies go against the direction of fundamental factors.  Have faced a significant price increase.  It should be noted that large industries such as petrochemical industry and refining industry have become one of the most important leaders in attracting demand and stock price growth in the Tehran Stock Exchange, while these industries are in a precarious situation due to falling oil prices and declining demand.  .  In some other large industries, such as the automotive industry, or companies with very high accumulated losses, or even companies with very heavy debts and on the verge of bankruptcy, experienced stock price growth, of course, from August this year until now with  Extensive stock price reforms of 30 to 60 percent have been met.

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