The rise or fall of the exchange rate always directly and indirectly affects the capital market. As exchange rates fluctuate in the market, we also see the effects of these fluctuations on stocks. It is natural that these changes and fluctuations also affect the profitability of companies. Capital market stocks  are divided accordingly into two categories:  dollar stocks  and non-  dollar stocks .

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Non-dollar shares

These shares include shares of two groups of companies. One of them includes companies that have domestic sales; That is, all sales of the company’s products or services are done in the country and their sales are based on Rials.

There are also industries whose raw materials are imported from abroad, and in order to provide the currency needed to buy raw materials, these companies must buy the currency from the open market or buy the required currency from the government. Therefore, increasing the exchange rate increases the cost of these companies or reduces their profitability.

An increase in the exchange rate or the dollar exchange rate can have a negative impact on industries known as non-dollar industries. This negative impact can only be eliminated and compensated if these companies are accompanied by an increase in the sales rate of the company’s products in the country.

Often in times of recession where demand is limited, the rate hike is not actually achieved by governments and companies are constrained. Therefore, an increase in the exchange rate will not have a positive effect on these industries.

Some examples of industries in our country that face rising dollar rates with increasing costs and declining profitability are:

• automobile manufacturing
• Industrial soot companies  that import raw materials from abroad and their output is provided to rubber companies.
• The food industry,  like lubrication companies, whose raw materials are purchased from foreign countries such as Saudi Arabia and sold domestically.

Dollar stock

Export-oriented industries that also have domestic raw materials are dollar stocks. An increase in the dollar rate will increase the profitability of these stocks.

Petrochemical industries, mines and metals, refineries and similar industries that, like the petrochemical industries, are supplied with raw materials from inside the country and are sold for export and abroad, including dollar stocks.

Dollar companies sell in currencies and dollars; Therefore, rising exchange rates increase the profitability of these industries.

At times when we have an increase in the exchange rate in the country, the profitability of these companies increases as the exchange rate increases.

On the other hand, in industries such as mines and metals – which our country is rich in and we sell as raw materials – the higher the exchange rate, the higher the amount of money from the sale of these materials.

What is the best strategy?

In the first place, the best strategy is for us to closely monitor these fluctuations and exchange rate trends in the market, and at different times to determine our strategy according to factors such as economic prosperity, recession, inflation and macroeconomics. Let us.

On the other hand, due to the raw material sales that we have in large stock exchange industries, these fluctuations can have a direct impact on global rates and the profits that these industries make during the year. Therefore, we must also pay attention to global price fluctuations.

Try to build your portfolio by combining dollar and non-dollar stocks so that you can reduce the risk of your trades during exchange rate fluctuations or when we see a decrease in the exchange rate inside the country.

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