“Bubble growth of mining companies in the capital market”, “stock market collapse”, “risk waiting for shareholders” and the like are some of the phrases that are heard more and more these days.
For several days now, the growing trend of the capital market has been declining, and in the meantime, mining companies and mining industries are still facing the growth of stock values; Companies that have a special place in the Iranian capital market.
Despite the downturn in the stock market and negative views about the future of this market, mining companies and mining industries are in a good position and we can still hope for the future of their market. In particular, according to some economic activists, Iran has special capacities in the mining sector, which provides the basis for continued development of activities in this field.
On the other hand, the continued growth of minerals raises the possibility of bubble growth and beyond their intrinsic value. On the other hand, many experts emphasize that a significant part of the growth in the value of shares of mining companies and mining industries should be attributed to the inherent capacity of this sector and emphasize that it is wrong to know the bubble value of mineral shares. Despite all this, if we consider the share of the mining industry in the capital market to be real, we can say that power is in the hands of the miners these days.
We have talked to capital market experts to examine this issue and the risks in the stock market of mining companies.
*** The competition has increased
Some experts consider a significant part of the growth of mining companies’ stocks as a result of the increase in the value of the dollar against the rial, and believe that the expectation for the continuation of this growth is reasonable and has occurred due to significant inflation in society. At the same time, they emphasize that Iran’s economy is in a different situation from other countries due to years of sanctions. In such a situation, anything in Iran can be exchanged much more expensive than in other countries, and it is fundamentally wrong to compare the value of a company or a car or a laptop in Iran and internationally.
In addition, in recent months, as the devaluation of the national currency has intensified, a significant flow of liquidity has flowed into the capital market. Under such circumstances, competition for the stock of mining and mining companies, which often have strong backing, has increased, and it is natural that in such circumstances the value of these complexes will increase even more.
*** No bubble growth
Saeed Barzegar, a capital market expert, said in an interview with Samat: “Several factors have attracted capital to the stock market, especially large and successful companies such as mining companies.” The reduction of bank interest rates, exchange rate jumps, verbal support of officials for the capital market, entering this market with minimal capital, the possibility of high and easy liquidity of this market and the considerable risk of investing in parallel markets have provided.
Barzegar added: “Iran has special mineral capacities and accordingly, activities in this field and related industries are associated with economic advantages.”
There are all the factors necessary for the growth and dynamism of the mining industry, including natural resources, rich energy resources, as well as cheap labor in Iran. Together, these characteristics provide the ground for the growth and development of activities in the field of mining and mineral industries. Therefore, the units operating in this field are of high value and seem to be very suitable for long-term investment.
“In such a situation, there is no bubble in the value of companies operating in the mining and mineral industries and their shares,” the market expert said. Of course, it is possible that in a short period of time, a company’s share will grow tremendously, but this growth will be moderated in the medium term due to inflation in the country and the growth of the value of its assets.
*** Economic separate from the world
Barzegar further and in response to a question about the reasons for the high value of Iranian companies in comparison or similar collections in the international community, said: The Iranian market is different from other countries. Years of sanctions and special conditions that have overshadowed the country’s economy have made Iran’s economy unmatched by other countries. “When you have a market separate from the global market, it is wrong to compare your assets with global assets,” he said.
This characteristic is not limited to the stock market and the value of mining companies operating in it, meaning that most goods in Iran are more expensive than in other countries. In fact, Iran’s economy is like a separate island, where prices are practically set locally. In addition, it is not possible for Iranians to invest in other countries.
The economist added: “Iranian companies incur various surplus costs due to sanctions and lack of connection to international markets;” Therefore, if such restrictions are removed, the profitability of such companies will increase sharply by participating in international communities and interacting.
*** Companies active in the field of mining industry
The capital market expert pointed out: The total number of companies whose shares are offered in the capital market is not very high. Among the companies offered, some have more potential for profitability. Companies operating in the field of mining industry fall into this category for the reasons mentioned earlier and their capacities; Therefore, there is more competition to buy shares in these collections. This also provides the basis for their value growth.
He added: “Meanwhile, our rials have more bubbles than the shares of these companies.” In recent months, we have seen the devaluation of the rial against the dollar.
However, there is still the view that further growth of the dollar is possible, which also paves the way for a re-growth of prices.
He concluded: “Despite all the efforts made to blacken the future of the stock market, companies active in the mining and mineral industries have a bright future; Therefore, we should hope for the continuation of their profitability trend.
*** All eyes are on the stock market
Albert Baghzian, an economist, said in an interview with Samat about the growth of shares of mining companies in the capital market: “There are concerns about the bubble growth of some mining companies in the capital market and the risk of their collapse, which is fundamentally wrong.”
In such a situation, the question arises why there is no concern about the unbridled growth of housing or car prices? Undoubtedly, if the import of cars into the country is liberalized, all the people who bought cars or invested in these goods will suffer. Or mobile phone prices have risen sharply in recent months due to exchange rate fluctuations as well as import restrictions due to international sanctions, in which case many would suffer if any of these restrictions were lifted. But there is no need to worry about these cases and only the finger of blame is pointed at the capital market.
The economist added: “Therefore, raising such scandals is only aimed at destroying the capital market.” He emphasized: the construction of an active unit in the field of mining industry is not so simple. For example, the construction of a new steel unit in the country is not as simple as the current situation, because on the one hand, the construction of a new unit is very time consuming and on the other hand, sanctions create several obstacles in this direction.
Meanwhile, part of the growth in the value of these companies is due to the increase in their assets. Every factory has a considerable amount of land and buildings. It is natural that the value of these assets has grown significantly in recent months, and this growth continues.
*** Concluding remarks
Baghzian said that the jump in the growth of the dollar also has a significant impact on increasing the value of steel companies and mining industries. When the dollar exchange rate rises to more than 20,000 tomans and it is still not far from the expectation of its further growth, it is natural that the value of companies also increases. Or when the government targets inflation at 25 percent, it means that the value of each company increases by 25 percent. In fact, all economic parameters have provided the basis for the growth of the stock market.
Albert Baghzian concluded: “Meanwhile, if the government wants to manage this market and alleviate the existing concerns, it must offer shares of more companies in the stock market, so that buyers have more choice.”
From all of the above, it can be seen that although the growth of the capital market has accelerated significantly, the stocks of companies do not have a bubble. In addition, if in some cases the market value of a company grows too much, it will be adjusted in the medium term and under the influence of market mechanisms and due to rising inflation. It seems necessary to pay attention to this point. Many companies operating in this field have a significant role in the development and economic growth of the country, so the use of terms such as “bubble growth”, “stock market collapse”, etc. is wrong and to the detriment of the economy. It is national.
smt
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