In recent months, the reduction of liquidity in the capital market has become evident, which is confirmed by looking at the trading values in the stock market and the values of buy and sell orders in the trading system. Consequently, in the final days of the previous head of the Securities and Exchange Organization, an emergency meeting was held with the former Minister of Economy and the Governor of the Central Bank, where agreements were made to inject banking resources into the development and stabilization fund for stock purchases. Additionally, the Central Bank Governor mentioned that the banking system would be allowed to buy shares, contingent upon removing legal obstacles within the specified timeframe. However, several weeks after this urgent meeting, there have been no significant developments, and the mentioned agreement has remained dormant in the meeting room.
Following the change in leadership at the Securities and Exchange Organization, Dr. Seyedi also acknowledged the liquidity issue in the market, and his brief remarks can be seen as an accurate diagnosis alongside a reminder of the lost trust. However, what is important for the overall market, beyond the reminders of liquidity shortages or lack of transparency and the need for predictability or restoring trust, is to focus on the structural components and the realities of the stock exchange.
A pressing question arises: does the stock market truly lack the necessary resources, or has the allocation of resources been inadequate? Perhaps the serious question is whether the nature of the capital market has been preserved, or whether critical issues stemming from three years of policy changes in investment funds have created a path for the vulnerability of the capital market amidst the thriving money market.
If we refer to the initial sections that divide financial markets, we first encounter two segments: the money market and the capital market, each with its functions and definitions, and their structures should be shaped accordingly. In advanced economies, the money market has a complex structure with various instruments aimed at controlling inflation rates and fulfilling other functions using tools such as interest rates. The capital market also offers diverse instruments catering to different investor risk appetites, but it must maintain its market structure. However, what we have witnessed in recent years, particularly in the last three years, is a kind of structural breakdown and perhaps a takeover of the stock exchange’s structure and responsibilities by policymakers, resulting in the deepest recession seen in recent days.
Interbank activities are conducted by the Central Bank within the structure of the stock market. A significant portion of the stock market structure has been allocated to the debt market, with the Central Bank as its policymaker. The capital market, which should serve to finance production and large economic enterprises in the country, has effectively played the role of a “piggy bank” for the government. As a result, production units have turned to banks for financing instead of the stock market, even though these banks are either unable to provide loans or have used phrases like “money creation” as an excuse to reject the credit requests of large producers; this creates a vicious cycle that undermines the mission of the stock market, portraying it as broken and incapable of fulfilling its role, unable to restore investor trust and ineffective in financing production units.
Recently, a new interview with Dr. Khajeh Nasiri, a former manager of the Securities and Exchange Organization and financial institutions in the country, was published online, containing important points and revealing insights that could certainly help clarify the investment market. Furthermore, the response from the Securities and Exchange Organization to the questions raised by such remarks is a collective demand.
In part of Dr. Khajeh Nasiri’s statements, he addresses the liquidity shortage in the stock market and clarifies the formation and objectives of fixed-income funds. Dr. Khajeh Nasiri was involved in drafting the laws related to the establishment of fixed-income funds and, while stating financing production as one of the main objectives for these funds, he examines their current status.
It is expected that the Securities and Exchange Organization will clarify why the mission of these funds has shifted from financing production to other purposes, and why the vast resources of these funds have been locked in bank deposits and government bonds instead of serving production and the stock market. Why has a powerful tool that could have led to the enhancement and development of the capital market become an operational arm of the money market, yielding no significant achievements for the stock market and directing the specialized knowledge of the stock market towards negotiating with banks for slightly higher interest rates? In a situation where serious criticisms of the banking system’s performance are raised by officials, has the current role and structure of fixed-income funds provided anything other than difficulties in financing large production and service enterprises in the country?
It seems that the new leadership of the Securities and Exchange Organization while clarifying and rectifying the erroneous practices of recent years, must also strive to preserve the essence of the capital market. By adopting scientific measures and a comprehensive financial toolkit, they should leverage the existing capacity and liquidity within the stock market to deepen stock transactions as the main segment of the capital market. Continuing the flawed practices of recent years and the negative outlook that some past managers have had toward shareholder profits will lead to nothing but a distortion of the capital market and further recession, the ultimate result of which will be visible in the stagnation and underdevelopment of production in the country.