The events of 99 are repeating
According to Iran Gate, the more than 14% drop in the Tehran Stock Exchange in the past week has led to a sense of panic among stock market participants. Many observers also warn that the events of 99 may be repeated in the capital market. Some believe that the Tehran Stock Exchange had a bubble and market participants should avoid further investment in this market. But is this claim true or is the Tehran Stock Exchange bubble-free?
The recent stock market decline of about ten days has once again created a sense of panic in the market. As stockholders say, they are afraid of the black and white rope, and the smallest price tension in the stock market reminds them of the events that happened in 99. Now, this discussion has taken hold on social networks and stock market forums, whether the bubble that engulfed the stock market in 99 and caused its explosion is still growing today.
A look at the downward trend of the market
To examine the events that have occurred, the downward trend of the index from 17 Ordibehesht to this side should be evaluated. To answer the ambiguity of whether there is a bubble in the stock market or not, it should also be noted which symbols have experienced a more severe decline.
An analysis of the events of the past ten days in the Tehran Stock Exchange shows that only 15 stocks have shown an upward trend during the bearish market days. Most of these stocks belong to the smaller market group. One of the most important of these stocks is Farood, which is owned by Shahroud Steel Company and has had a return of over 80%.
However, a look at the bearish market stocks in the past 5 working days shows that out of 499 stocks in the capital market, 484 stocks, or 97%, have experienced a significant or slight price decline. Among these stocks, Kamarjan, Bekam, Fesouj Chen, have experienced the highest decline.
But by examining the smaller stocks and the index, it can be understood that the intensity of the decline in the prices of smaller stocks has been much higher than the market average. To better understand this issue, we can point out the much greater intensity of the decline in the prices of 369 smaller stocks in the red week of the Tehran Stock Exchange. A look at the list of symbols in this group clearly shows that the vast majority of these stocks belong to the smaller market group.
This statement should be analyzed alongside the growth rate of stock groups in Farvardin and Ordibehesht 1401. The equal-weight index had a return of approximately 30% until before 17 Ordibehesht. The equal-weight index also experienced a growth of about 25%. The 5% difference between the growth of the equal-weight index and the overall index indicates that the growth rate of smaller stocks has been significantly higher than that of small and medium-sized stocks in the stock market.
Does the stock market have a bubble?
Most stock market experts believe that the influential factors on market trends do not give this warning to shareholders that the Tehran Stock Exchange has a price bubble. However, this statement is relative and cannot be generalized to the entirety of the market’s stocks. To understand whether shareholders can comfortably engage in their transactions and avoid panic, attention should be paid to the mentioned data.
As mentioned, smaller stocks have experienced faster growth compared to the index stocks during a month and a half until 17 Ordibehesht 1402. This is happening while a significant number of these stocks see heavy buying and busy queues in the days leading to a sharp market decline in their track record.
For example, among the 6 symbols known as paper stocks from the petrochemical group of the stock exchange, these stocks have contributed to the faster growth of the equal-weight index and subsequently the overall index. In other words, these buying queues, which have no backing, can be considered as part of the rapid growth of the equal-weight index and consequently the overall index.
In fact, analyzing the overall market situation conveys the message to the audience that smaller stocks have been accompanied by a relative price bubble until before May 7th. However, now it can be said that this bubble has significantly disappeared, considering that the decline in this group has been much more severe compared to the benchmark indices.
In simpler terms, it can be said that smaller stock prices carried a heavy bubble until before May 7th. But after the more than 200,000-unit decline in the overall index and the 15% decline in the equal-weight index, this bubble has almost burst. Therefore, it can be claimed that the Tehran Stock Exchange is currently almost free from a price bubble. Although some stocks are still affected by this situation, overall, it seems that the majority of stock symbols are still lagging behind the 50% inflation that has led to continuous growth.
In other words, not only does the stock market as a whole not have a price bubble, but it can be argued that the Tehran Stock Exchange is facing a negative price bubble. Contrary to some claims, the current stock prices are significantly lower than their actual value and still have room for growth. Although some stocks still have a positive bubble and are affected by a price bubble, overall it seems that the capital market has much greater growth potential and the perceived risks for participants in this field are not significant.
The Minister of Economy says there is no bubble in the stock market.
Persian
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