Iran 2008 share losses modest compared to world markets

Tehran: Shares on the Tehran Stock Exchange look set to end 2008 with modest losses relative to many world markets after an oil price tumble swallowed earlier gains, but a recovery in crude is key to 2009 performance.

Iran's June presidential election and the nuclear stand-off with the west will also influence sentiment towards the Islamic Republic's 356 listed companies next year.

Share prices in the world's fourth-largest crude producer, which is under US and UN sanctions over its disputed nuclear plans, rose around 30 per cent in the first six months of 2008, sheltered from the international credit crisis.

But as oil dived $100 (Dh367) from a July peak of $147 per barrel, Iranian stocks turned sharply lower, losing all the year's gains. The all-share index traded at 8,907 yesterday, down around nine per cent from early January, and the monthly volume of trade was just $54 million in November, half its level earlier in the year.

"All of the industries of Iran are dependent on oil revenue and petrodollars," economic commentator Saeed Laylaz said.

He also cited uncertainty ahead of the election and worries about the nuclear row among factors weakening the market.

Despite rallying earlier this year as crude surged, Iranian shares remained below their 2004 peak of 13,540.

State television says the government directly or indirectly owns about 35 per cent of the market, and foreign investors about two per cent.

"During the past three months we have had the current financial crisis in the world, a sharp drop in oil prices and arguments between parliament and the government," economics Professor Ebrahim Hosseini-Nasab said in explanation for the market reversal.

He was referring to disagreement between lawmakers and the government of President Mahmoud Ahmadinejad, who is expected to stand for re-election in June, over plans to overhaul Iran's extensive subsidies for energy and other things.

Ahmadinejad's critics say his policies have squandered Iran's oil windfall gains and that another four years of profligate spending would be damaging.