Iran stock market booms, but analysts fear a growing bubble

Even as US sanctions, unemployment, inflation and low oil prices batter the Iranian economy, there seems to be at least one refuge for investors.

The Tehran Stock Exchange has seen gains of 225% in the last year, with sharp increases even as the country struggled with one of the first serious coronavirus outbreaks outside of China.

Encouraged by a government eager to privatize state-owned firms, average people now have access to the market and can trade shares, earning returns they'd never see in a savings account or a certificate of deposit.

But these rapid gains increasingly have analysts and experts worried about a growing stock market bubble, one that could be particularly dire and wipe away the earnings of the average people flooding into the market.

We have witnessed a very strange incident," said Hossein Tousi, a member of Iran's Chamber of Commerce , speaking to 90eghtesadi.com, an Iranian economic review website. "As all markets have fallen, crude prices have fallen sharply, but in our market, the situation is upside-down. It is clear that it is a bubble.

Global stock markets have seen rapid swings amid the coronavirus pandemic.

The crisis has sent US unemployment surging to 14.7%, a level last seen during the Great Depression. Benchmark Brent crude prices, trading over $70 a barrel a year ago, now hovers just over $20 a barrel as demand collapses amid an oversupplied market.

But that hasn't slowed in the Tehran Stock Exchange. Founded in 1967, the market lists some 1,000 companies, including major firms like car manufacturer Iran Khodro. The bourse now has a market cap of more than $200 billion. And its daily 5% gains haven't gone unnoticed by ordinary Iranians.

I visited the related office for several days to receive my Sejam code to get able to trade, said Mohammad Reza Mansouri, who makes deliveries using his personal van. The office was crowded with people like me.

The exchange lists a half-million active traders out of some 12 million people who registered to buy and sell stocks.

An everyday 5% percent is very sexy, said Abdollah Rahmani, a retired bank employee who trades stocks. What other market makes such a profit?