History
See also: Economic history of IranThe concept of stock industrialization dates to 1936, when Bank Melli, together with Belgian experts, issued a report detailing a plan for an operational stock exchange in Iran. However, the plan was not implemented prior to the outbreak of World War II, and did not gain traction until 1967, when the Government revisited the issue and ratified the "Stock Exchange Act". Initially limited in size and scope, the Tehran Stock Exchange (the "TSE") began operations in 1967, trading only in corporate and government bonds. Iran's rapid economic expansion in the 1970s, coupled with a popular desire to participate in the country's economic growth through the financial markets, led to a demand for equity. The Government became actively engaged in the process, by granting shares to employees of large state-owned and family-owned enterprises. Market activity increased substantially, as both companies and high net worth individuals participated in the new-found wealth associated with the TSE.
Everything came to a standstill after the Islamic Revolution leading in a prohibition against interest-based activities and nationalization of major banks and industrial giants. Mobilization of all resources towards the war effort during the 8-year Iran-Iraq war did not help matters. However, the Government fully embraced economic reforms and a privatization initiative in 1989 with a surge of activity in share activity of many state-owned companies through the defined targets in the first "Five-Year Economic Reform" where the Government together with the Parliament defined the economic prospects of the country for the coming five years. Attention to promotion of the private sector and new interest in the TSE brought life back to the market. However, lack of regulation and out-of-date legal framework led to crisis in the market leading to certain "meltdowns" until today. The market has experienced its share of highs and lows in the past years including topping the World Federation of Exchanges' list in terms of performance in 2004 to tumbling down to last place in 2007 due to political uncertainties in the region.
| 2006 | 2007 | 2008 | 2009 | |
|---|---|---|---|---|
| Number of Listed Companies | 417 | 415 | 346 | 337 |
| Market Capitalization (USD Millions) | 43,794 | 45,574 | 49,040 | 58,698 |
| Total Value of Share Trading (USD Millions) | 6,230 | 7,872 | 15,252 | 16,875 |
| Daily Average Trading Value (USD Millions) | 26.1 | 32.5 | 63.8 | 65.4 |
| Total Number of Trade in Share (Millions) | 15,839 | 23,401 | 37,975 | 82,479 |
| No. of Transactions (in thousands) | 1866 | 2107 | 1978 | 2646 |
| No. of Trading Days | 239 | 242 | 239 | 258 |
| Share Turnover Velocity (%) | 15.6 | 16.37 | 26.5 | 28.74 |
| P/E ratio | 5.4 | 5.2 | 4.1 | 5.5 |
| Dividend yield (%) | 10.44 | 14.5 | 12.3 | 15.8 |
| Market Capitalization/GDP (%) | 17.9 | 15.4 | 14.1 | 15.2 |
Read more about this topic: Tehran Stock Exchange
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