Analysts say the autumn slump is partly seasonal but has been exacerbated this year by the TSE's initially uncertain handling of the summer's rampage. They expect prices to start picking up again in November, a little after the market's traditional seasonal upturn.

'Many investment companies reach the end of their financial year in September, driving them to sell shares and book profits,' says Shahin Shayan Arani, a university lecturer and consultant with a top financial investment firm in Tehran. 'This boosts supply and lowers prices in October, which makes it a great time to buy.'

Arani says retail investors, mainly private individuals with little experience of capital markets, have been frightened out of the market by the TSE's initial appearance of confusion as it struggled to find a damping response.

'When the TSE cancelled the price increases two months ago it created a negative impression,' says Arani. 'There seem to have been several different policies over the past few months, which have given the appearance of haphazardness. Now it has stuck with one policy for the past month and I hope it will stick with it for another month or two. That will calm investors and should bring them back to the market.'

Arani says money is now going into government bonds rather than foreign markets or real estate, which is itself suffering a slight recession.

After his appointment as the new TSE secretary-general in May, Hossein Abdoh Tabrizi rescinded the previously restrictive limitations on price changes. These had been instituted by the former secretary-general, who took over when the market crashed after the 1993 bubble. However, prices rose meteorically throughout the summer, largely through speculation. As prices threatened to spin out of control, Tabrizi reintroduced some of the restrictions, causing negative reaction in the market. In September, a more measured policy was implemented based on weighted average prices and the level of free-float shares (MEED 26:9:03).

'In each of the more successful industries there are a couple of star performers - such as the Khuzestan and Tehran cement companies,' says Arani. 'But we also see less successful performers in each sector too. As the recessionary attitude kicks in, companies with lower price-earnings multiples become more popular but the higher ratios will be hot again when the rally begins.'

Exchange rate: $1=IR 8,340

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