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Establishing an Efficient Capital Market
When the metals bourse is inaugurated, we can be hopeful about the future
trend of production and business in the sector.”
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Mohammad Shariatmadari, Minister of Commerce |
Prosperity of the capital market would lead to economic prosperity and an
increase in national revenues in addition to attraction of small capitals.
These factors could ultimately lead to the elevation of the consumption level
and prosperity of production and economic units.
The relative balance in the market has shifted part of capitals from the
domain of tangible assets such as gold and automobiles toward financial assets
such as bank investments as well as purchase of securities and stocks.
In this way, investing in profitable economic activities such as bourse and
production units will not only elevate income levels and people’s purchasing
power, but also boost activities of production and service sectors and supply
of better products and services. Familiarity with effective institutions of
the economic prosperity cycle including stock and commodity markets would
increase turnover of capital and provide opportunities for everybody.
The stock exchange is an organized and consolidated market that in addition to
facilitating turnover of capital, stocks and securities, would pave the way
for direct participation of deposits and capitals by capital owners or
indirect participation by banks, companies and investment funds in the market
and other economic activities.
The commodity bourse is also a consolidated and organized market in which
purchasers, sellers, producers and consumers, brokers and traders contribute
to transactions and, as a result, the prices hit a balance and the market risk
would be minimized both for producers and the end users.
Undoubtedly, expansion of investment culture and activity in modern stock and
commodity markets needs strong determination on the part of all authorities of
the sector as well as developing concepts and familiarizing other parties with
its characteristics.
It is for this reason that the Minister of Economic Affairs and Finance
considers the capital market of the country as a key tool for developing
economy and production and believes that expansion of such markets could pave
the way for the economic prosperity of the country.
Tahmasb Mazaheri stressed the need for continued and healthy activities at
stock and commodity exchanges and noted that the Bourse Council would
supervise all the elements in the market as the authority in charge.
He had already announced that although the Iranian capital market had grown
favorably in terms of variety and geographical development during the recent
years, it was still far from gaining access to the common tools used in other
parts of the world.
Minister of Commerce, Mohammad Shariatmadari, also believed that developing
capital market and establishing a commodity bourse was considered by the
government to do away with serious concerns of the sectors’ activists
including producers, importers, exporters and consumers. “Part of it has been
realized while another part is underway,” the Minister said.
He believed that instability of goods prices in the market, lack of
transparency, existence of monopolies and underground activities as major
concerns of the sector’s activists, adding, “When the metals bourse is
inaugurated, part of those concerns would be eliminated and we could be
hopeful about future trend of production and business in the sector.”
The Minister stated that facilitation of trade in the export and import sector
was another incentive for developing a capital market and establishing a
commodity bourse in the country.
Shariatmadari further noted that existence of various risks was another
concern of consumption, production, export and import sectors and stipulated
that establishment of similar markets could bring those concerns down to the
lowest level.
He mentioned stabilization of prices and increasing motivation for future
in-advance purchases as another feature of the goods bourse and noted, “Since
the law governing the market is not comprehensive, it should be amended to
pave the way for the establishment of similar markets that aim to do away with
monopolies.” Shariatmadari opined that the government’s interference in the
market was minimal, but asked for increased support from the Iranian
government for those incipient markets.
Meanwhile, Governor of the Central Bank of Iran believed that establishment of
the bourse was an effective measure for expanding the capital market and
mentioned elimination of monopolies, fluidity of supply and demand as well as
transparency as some achievements of such markets. Ebrahim Sheybani added that
gaining trust of people and investors was necessary for correct guidance of
those markets because inattention to that issue would drive people away from
the sector.
An economic expert also noted that Iran’s sensitive economy needed bold
decisions to achieve complete dynamism and get out of the dire straits.
Jamshid Edalatiyan Shahriyari added that economic reforms were a necessity for
the country, adding, “As long as the economic structure of the country with
regard to the capital market has not improved, no investment would yield
positive output.”
“Although Tehran Stock Exchange is among the world’s safest bourses from the
viewpoint of investment, the culture of stockholding has not been
institutionalized in the country,” he said. The university professor stressed
the necessity of increasing awareness of people with regard to bourse
activities and opined that the presence in the market should be facilitated
for all activists while the situation should not be changed in such a way that
most of its stocks were controlled by a few big investors.
A member of Majlis Economic Commission also referred to the role of foreign
investments in the Iranian capital market and noted that such investments
could increase competition in the capital market and affect the quality and
sales of stocks presented there.
Iraj Nadimi added that due to stagnation of some monetary and financial
markets and inclination of the liquidity to other sectors, foreign investors
should be encouraged to take part in the capital market.
Another expert on economic issues believed that regulations and policies
adopted by bourse should be transparent and reliable for all participants and
activists present on the market. Ali Amin Tafreshi, said using expert analysis
for changing or improving bourse policies was necessary and added that the
supervisory body and experts present at the bourse should enforce necessary
decisions in the market through comprehensive and unambiguous analyses.
He divided investors in bourse as professional investors with long- or
short-term approaches and nonprofessional ones with a short-term plan, adding
that the “Presence of all investors in the above categories was necessary for
the establishment of a dynamic capital market. All bourses throughout the
world are made exciting through the presence of short-term investors.
Tafreshi noted that policies enforced by supervisory bodies should lead to
transparency while being understandable and reliable for all kinds of
investors. At the same time, the ascending trend of bourse indexes indicates
expansion of its role in attracting liquidity and mobilizing capital,
facilitating privatization, downsizing the government, motivating the private
sector to participate in the economic activities and moving toward the
establishment of an efficient capital market.
The Cabinet approved the bill on an Iranian securities market (capital market)
during its session on 12 November 2003. The bill had been already approved by
the economic commission of the Cabinet. Based on that law, the body
supervising the Iranian capital market would be separated from the supervisory
body of the monetary market and more latitude would be given to the capital
market.
The law would partly remove problems with regard to diversity of securities at
the capital market. For example, based on the bill, when the new capital
market law is approved, special priority would be given to publication of
private sector bonds to diversify the stocks market in terms of securities
that are being traded. In addition to encouraging equitable and transparent
transactions in the securities exchange, the bill would organize the country’s
primary market for new investments.
Ultimately, the government would have to develop capital and financial markets
and increase developmental credits for the completion of industrial projects
to accelerate economic development and do away with economic bottlenecks
currently plaguing the sector. In this way, the half-finished projects would
become ready to enter the capital market and earn new revenues. |
