Majid Eshqi, the CEO of Iran's Securities and Exchange Organization, says it is working to provide more funding options for companies through diverse financial instruments.
"One of the challenges the economy is facing is the dominance of the banking sector, which has undermined the growth of the stock market. Redirecting resources from the bourse towards production sectors is fundamental to lift economic growth," he was quoted as saying be SENA news agency.
"By providing alternative sources of funding we hope to convince companies to expand production and contribute to the economy's growth," he said. "Investing in the stock market solely for the sake of trading stocks is not beneficial… funds must be channeled towards actual production."
Iran’s capital market now funds almost 25% of the economic sector. This share was a meager 5% in 2011-12 while banks accounted for 95%. The increased interaction of the capital market and businesses in the past decade shows its potential.
He emphasized the importance of careful consideration and professional investment in the stock market. "Basically, stocks have long been considered high-risk demanding professional knowledge and expertise for investment."
While acknowledging that the current situation is not the same as the turbulent market of 2019, Eshqi stressed the need for caution while investing “due to the varying conditions of companies in terms of profitability, asset value, and future risks.”
To mitigate the risks and encourage more informed investment decisions, he proposed putting money in professionally managed investment funds, which range from low-risk to high-risk funds. These funds are managed by professional teams and have better liquidity, making them more accessible to investors.
Paving the way for the entry of knowledge-based companies, increasing the share of the capital market in funding companies and increasing the number of real estate investment funds are among targets of the capital market in fiscal 2023-2024.
"Issuing bonds by newly-listed firms, entry of new companies into the market and raising the capital of already-listed companies are also expected to help," Eshqi said.
He pointed to plans for easing the entry of knowledge-based companies into the bourse saying that it is high on the SEO agenda.
Startups and knowledge-based companies wanting to join the stock market must go through a bloated bureaucracy that other companies with tangible assets are exempt from.
Stock market officials earlier said that the regulatory barriers for such firms have been removed and new guidelines for listing startups are being finalized.
