In order to make a rational investment decision, investors require a comprehensive knowledge about economic turning points and the effects that these acute moments can have on their investing decisions.
Every single element that affects the companies profitability, or from a more precise point of view, every factors that can influence the amount of money which is expected to be invested in different economic sectors, should be professionally analyzed before making any investment decision.
Observing the historical market reactions to different events that can be assumed as a turning point in economy, gives investors good ideas about the optimum time to enter to the capital market and choose the most profitable companies to invest in.
Since there are variety of investing opportunities available in Iran’s capital market, considering the investors enthusiasm to take advantages of these opportunities, analyzing capital market behavior facing major economic factors in the past, would be desirable.
A useful index that can transmit a signal about capital market situation is the liquidity degree of what investors want to invest in. In Tehran Stock Exchange, stock’s liquidity implies a gap between the stock’s buying and selling price. In other words, it shows whether converting the stock to cash can be done easily or not. In tough and unstable economic and political situations, the liquidity degree in capital market should be low from the logical point of view.
During last year, Iran has faced critical moments after removal of sanctions and this historical deal have some short term and long term effects on Iran’s economy which needs to be considered with special attention in the capital market analysis.
In charts below, the historical data for market value and trade stock value has been shown for last days of last five quarters (September 2015- September 2016) in Tehran Stock Exchange.
The shares turnover index has been defined as the trade stock value divided by the capital market value, and shown as a liquidity index in the third chart. We want to see if there is any significant change in stock market liquidity during this critical period of time.
Since there is a positive overall atmosphere in the capital market for investing, the spread will be minimum. Also in such good economic environment, the value of the capital market would raise considerably. Recent political events in Iran, has led to a great economic environment for investing and the above charts can be such a good evidence for this claim.
As we can see, there has been a considerable increase in the value of traded stock and also in the market value for the last two data of this period of time. Which can be the result of an increase in the amount of money has been invested in stock market. On the other hand, the higher “shares turnover index” for two last data, means the market has become more liquid which can be a good signal for investors. So, considering the Iran’s great investing potential after lifting of sanctions, it may be a good starting point to invest in this country.