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Code: 49170 Visited: 116 Publish Date: May 15 2018 - 1:01
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Capital Market
Pros and Cons of Industries with an Upward Trend
Tehran, May. 15 (SENA) - The overall markets’ trend has been downward since they touched their all-time highs three months ago, with Tehran Stock Exchange’s main benchmark TEPIX reaching 99,552. The main causes were uncertainties about the fate of the landmark Iran nuclear deal with the so-called group P5+1 and the unknown fate of Iranian rial devaluation.

Tehran, May. 15 (SENA) - The overall markets’ trend has been downward since they touched their all-time highs three months ago, with Tehran Stock Exchange’s main benchmark TEPIX reaching 99,552. The main causes were uncertainties about the fate of the landmark Iran nuclear deal with the so-called group P5+1 and the unknown fate of Iranian rial devaluation. The US President decided to unilaterally pull the US out of the deal but immediately after the markets, previously in distress, showed strong signs of growth.

Auto and real estate mass construction companies were among the main gainers. CEO of Padash Sarmayeh counted the contributing factors of their growth in an interview with SENA, mentioning that the speculations about these two industries are pushing the prices higher. “Auto and real estate have experienced a downward trend in the past two years and were way below their intrinsic values,” he said.

While the nuclear accord was entering into implementation phase in 2015, the auto industry’s upward trend kicked off as it was believed to be the first industry to be positively impacted by the removal of the sanctions. The shares entered into correction phase next year which lasted until recently.

The recent news about the possible increase in the price of domestic auto production was the main push. As rial devalued the prices of imported vehicles skyrocketed. Therefore, the domestic products are expected to experience a price increase. On the other hand, rial devaluation has a negative impact on their imported materials, but the recent decision by the government to inject dollar into the markets at the unified rate of 42,000 rials temporarily alleviated the concerns.

The industry also suffers from balance sheets loaded with overdue loans with high interests and lack of technological advancement, though having a huge local share by monopolizing the local market. Altogether, the main reason for soaring share prices is the very appealing price levels.

Real estate companies were under downward pressure for so long that some share were traded a third of their all-time high levels. The CEO believes that the upward trend will continue until they reach their intrinsic values.

The news about the possible increase in the cap of mortgage loans and a decrease of their interest rates were the main causes for investors turning toward this industry. A negative news also concerns the determination of the government to levy taxes on vacant houses about which Shams mentioned that the news is around for a couple of years but have not yet been enforced. Moreover, real estate companies do not possess a considerable portion of the vacant houses. “all this news is claimed to be pushing the prices, but the real reason is the current attractive price levels,” he added.

The CEO concluded that all the news might have possible impacts on prices of these companies but have no tangible effect on their profitability and won’t be projected on their financial statements.

 

 

 

 
By: Security and Exchange News Agency (SENA)
 
 
 
 
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