There have been anxious eyes on the Tehran Stock Exchange’s (TSE’s) main index, the TEDPIX, in the past several days, with some sharp falls causing concern that a perceived bubble was about to burst.

The index fell sharply for the fourth consecutive day on August 16 taking its overall decline to around 10%, but slight growth seen on August 17 and 18 has gone some way to encouraging investors that the worries were overblown. During the sharp decline, Iranian President Hassan Rouhani tried to instil some optimism saying: "Corrective fluctuations in the stock market are normal."

The index for the first time climbed above two million points on August 2—widely seen as an astonishing milestone to hit given that it had only broken through the 1.5mn points barrier on June 30 and the one million threshold in early May, soaring from around 500,000 in March—but by the end of August 18 showed 1.825mn points.

After falling 65,000 points on August 11 and around 25,000 on August 12, the TEDPIX experienced a 72,500-point drop on August 15 and 88,000-point decline on August 16. On August 17, it finished up 2,000 points and on August 18 it closed higher by 9,600, or 0.53% on the day.

No visible fundamentals

Analysts say the TEDPIX made its astronomical gains without any economic fundamentals visibly driving it to such highs. However, with Iran’s economy—particularly the Iranian rial (IRR)—battered by US sanctions, many investors, encouraged by signals from the government that there is to be an increasing amount of privatisation and listing of state enterprises, appear to have settled on the stock exchange as the best bet.

Amid the slump, the share price of the Social Security Investment Company (Shasta), at one point lost 19%. Government-owned giant corporations such as the Persian Gulf Petrochemical Company, Mobarakeh Steel, National Iranian Copper Industries, Isfahan Oil Refinery, Tehran Oil Refinery, Islamic Republic Shipping, Telecommunications, and Ghadir Investment Company also lost significant share price value.

In further comments on August 16, Rouhani talked about his administration's decision to implement a "stock market strengthening policy", adding: "Offering the government and public's diverse, profitable and secure assets on the stock exchange will continue in an orderly and sustained manner, as planned."