Iran stock market booms, but analysts fear a growing bubble

Even as U.S. sanctions, unemployment, inflation and low oil prices batter Iranian ecomy, re seems to be at least one refuge for investors.

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

Encourd by a government er to privatize state-owned firms, aver people w have access to market and can tre shares, earning returns y'd never see in a savings account or a certificate of deposit.

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

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

Global stock markets have seen rapid swings amid coronavirus pandemic. crisis has sent U.S. unemployment surging to 14.7%, a level last seen during Great Depression. Benchmark Brent crude prices, tring over $70 a barrel a year ago, w hovers just over $20 a barrel as demand collapses amid an oversupplied market.

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

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

exchange lists a half-million active trers 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 tres stocks. ”What or market makes such a profit?”

Even President Hassan Rouhani, beleaguered since U.S. President Donald Trump unilaterally withdrew America from his 2015 nuclear deal with world powers, has pointed to market as a rare bright spot for country. Iran's rial currency has fallen to 160,000 to 1 against U.S. dollar, as opposed to 35,000 to $1 in 2015.

“As Iran’s bourse has developed, (our enemies) become nervous and asked why market is developing while markets in world are in chaos,” Rouhani said at a Cabinet meeting last month. This rise "is because of efforts by all companies, business people and fortunately offering shares of big companies to stock market.”

stock market rise in part takes root in how Iran's ecomy has changed in deces since its 1979 Islamic Revolution. Immediately after taking power, Iran's Shiite ocracy seized large private industries, putting m in large trusts, or bonys. bloody 1980s war with Iraq saw Iran furr nationalize its ecomy.

In 1990s, Iran began a privatization effort. stock market became one way to accomplish this, with former hard-line populist President Mahmoud Ahminej giving out so-called “Justice Shares” in firms to poor. Some 50 million Iranians w hold those shares.

But Ahminej's efforts at privatization also saw firms sold off to paramilitary Revolutionary Guard and its allies, furr empowering hard-line force answerable only to Supreme Leer Ayatollah Ali Khamenei. Some firms that moved into private ownership have seen businesses stripped and later collapse, leaving workers without pensions and fueling sporic protests.

Lower returns in or investments also are sending people to stock market.

“ rise in liquidity in Iran’s financial market has me people expect high inflation in future," said Reza Khanaki, a Tehran-based financial analyst and manr. “ir bank deposits are yielding profits less than inflation rate, and so y are shifting ir investments to stock market. This change is causing rise in index.”

Squeezed by U.S. sanctions, Rouhani's government hopes to raise money through selling assets on exchange. His government in January also allowed firms to recalculate ir values, something critics warn masks true worth of ir production by inste inflating price of land y own, for instance.

“ Iranian financial press as well as foreign ecomists have raised concerns that meteoric rise of market is detached from underlying value of assets tred re and that bubbles have formed,” said Henry Rome, an analyst at Eurasia Group. “ government’s decision to focus privatization attention on market has elevated se risks. A loss of confidence in market could le to a destabilizing crash.”

Iranian political analyst Akbar Mokhtari warns it could be even worse, comparing “Justice Shares” to Shah Mohamm Reza Pahlavi's so-called “White Revolution” in 1960s that broke up control of feudal land barons and saw poor rush into cities. Those poor became backbone of protests that later drove him from power.

“ or side of this very important ecomic development can be impatience of shareholders about possible crashes that can cause instability in government,” he was quoted as saying by Rahbord, an Iranian political review channel on Telegram.

But some, like Mansouri, stock-tring deliveryman, say those fears don't bor m.

“I do t care about analysis as long as I profit day by day," he said.

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Associated Press journalists Mehdi Fattahi in Tehran, Iran, and Jon Gambrell in Dubai, United Arab Emirates, contributed.