Weekly Market Report

Trading Week: 4 – 8 November 2017

Summary

Main Topics

· TEDPIX rises 0.1% on lower volumes, refineries fall after strong rally I

· ranian power plant builder says it is in talks with General Electric

· Rial weakens as central bank raises official dollar rate

· Machine Sazi Arak falls sharply as trading resumes after six months

· Delayed coupons on municipal bonds are paidNon-oil trade deficit widens as imports rise and exports fall

 

Tehran Stock Exchange

The TSE Overall Index (TEDPIX) added 0.1% for the week to end at 87,897. It was the fourth week of gains although the market was mixed and the average daily trading volume fell to USD 40 million. The TSE30 Index, a measure of large-cap companies, fell 0.2% but remains 18.5% up since March 20, 2017, and 4% ahead of the overall index. The majority of sectors were little changed for the week. Engineering was an exception, climbing 4.4% thanks to its main constituent, MAPNA (MAPN). Base Metals and Oil Products fell follow­ing their recent rally.

 

MAPN, a builder and manager of power plants, rose 4.4%. The government agreed this week to reduce MAPN’s public liabilities by the amount of its receivables from the govern­ment. MAPN’s CEO also announced that the company was in talks with US multinational General Electric Co (GE) which may lead to a contract. The contract would be with GE’s subsidiaries outside the United States to be in compliance with long-standing US re­strictions on doing business with Iran.  

 

Chemicals climbed 0.9%. Persian Gulf Petrochemical Co (PKLJ), the largest company by market cap, added 1.8%. PKLJ is the main shareholder of Pars Petrochemical Co, a major ethane supplier which benefits from a weaker rial based on the official exchange rate.

 

The Oil Products sector, which includes refineries, ended 0.8% lower after a strong 9% rally last week. Higher oil prices and a rising official exchange rate have attracted inves­tors to refineries, which have low profit margins.

 

Base Metals fell for a second week. Esfahan’s Mobarakeh Steel Co (FOLD) dropped 1%, while its adjusted share price is still 82% up over 12 months. Iranian National Copper In­dustries (MSMI) fell 4.4%. MSMI closed with a P/E of 6.95x based on its own projection of EPS while the company’s assumptions about the exchange rate and global price of cop­per for the remaining six months of its fiscal year are both lower than current prices.

 

Machine Sazi Arak (MARK), the largest company in the Metallic Products sub-index, fell sharply when it resumed trading following an absence from the market of nearly six months. MARK opened 17% down and extended its decline to 23%. MARK increased its full-year loss per share estimate for the fiscal year ending September 22, 2017 by exactly 50%.

 

Iran Fara Bourse

The IFB Overall Index finished 0.2% up for the week and has gained 11.6% since March 20. Large petrochemicals like Maroun Petrochemical Co (PMRZ) and Zagros Petrochemi­cal Co (PZGZ) extended recent gains. Lavan Oil Refining Co (PNLZ) also ended the week higher. MIDHCO (KHMZ), a large holding with exposure to raw steel production materials, fell 2.3% and was a big drag on the IFB Overall Index.

 

The IFB’s chief executive disclosed that coupons of municipal bonds are finally to be paid to bond holders following months of delays. Officials had said the long delays were due to technical reasons and did not amount to a default even though inflation is running close to 10%. The IFB’s CEO admitted however that municipal bonds are traditionally more risky than Treasuries. 

 

Foreign Exchange Market

The Central Bank of Iran (CBI) raised the official dollar exchange rate by 0.6% to IRR 35,149. The official rate has steadily increased by nearly 8% in four months. The increase, combined with higher oil prices, is expected to raise public revenues and put the govern­ment in a better financial position. The market exchange rate gained 0.5% to around IRR 40,688. The increase seems to be linked to the rise in the official exchange rate rather than developments in Saudi Arabia or elsewhere. The CBI is following a policy of ex­change rate unification, but closing the gap is proving difficult. The CBI announced that a new FX trading platform, called “Domestic Reuters” has been added to the interbank trad­ing system to facilitate bank-based FX transactions.

 

Economic Development

Iran’s non-oil trade deficit widened to USD 3.1 billion for the seven months to October as exports fell 2.2% to USD 24.7 billion and imports rose 14.9% to USD 27.8 billion com­pared to the same year-ago period.

 

Imports from China increased 19% to USD 6.8 billion in this period. China remains the main source of Iran’s imports, followed by UAE (USD 4.6 billion) and Turkey (USD 1.9 billion).  Imports from France, a main supplier of auto parts to Iranian car makers, in­creased 40% to USD 823 million. Imports from Russia fell 63% to USD 419 million.

FX Information

Description

8 November 2017

2 November 2017

% Change

Official USD - IRR

35,149

34,950

0.6

Market USD - IRR

40,688

40,469

0.5

Official EUR - IRR

40,769

40,737

0.1

Market EUR - IRR

47,564

47,458

0.2

Official GBP - IRR

46,294

46,411

(0.3)

Market GBP - IRR

54,100

54,000

0.2

Market Information

Index Info

Close

Unit Change

% Change

%  Change from March 20, 2017

TSE Overall Index - TEDPIX

87,897

52

0.1

14.5

TSE30 Index

3,647

(6)

(0.2)

18.5

Iran Fara Bourse Overall Index

977

2

0.2

11.6

Description

This Period

Last Period

Market P/E

6.7

7.0

Trade Statistics

Description

This Period

Last Period

% Change

TSE Average Daily Trade Vol­ume (Million USD) **

40

53

(24)

IFB Average Daily Traded Val­ue (Million USD) **

41

42

2

Industry Index Information

Description

Close

% Change

Engineering Services

741

4.4

Utility Service Providers

221

3.6

Sugar

9,276

3.4

Coal Mining

1,284

3.1

Investment

1,959

1.6

Non-Metallic Ores

2,212

1.6

Chemicals

5,280

0.9

Banking

567

0.9

Oil Drilling & Services

483

0.8

Telecommunication

1,097

0.8

Construction

664

0.7

Foods excluding Sugar

3,459

0.3

Industrial Conglomerates

8,099

0.3

TSE All-Share Index

87,897

0.1

IT

12,358

0.0

IT & Communications

177

0.0

Medical & Measurement Products

10,244

0.0

Leather Production & Products

2,075

(0.0)

Textile

1,276

(0.1)

Pharmaceuticals

8,820

(0.1)

Automotive

16,784

(0.2)

Printing & Publishing

187,989

(0.3)

Ceramics & Tiles

2,070

(0.4)

Cement

637

(0.4)

Agriculture

6,433

(0.4)

Other Financial Services

2,153

(0.6)

Metallic Ore

15,716

(0.6)

Insurance

4,880

(0.7)

Oil Products

296,288

(0.8)

Paper Products

12,655

(0.9)

Machinery & Electric Equipment

492,500

(0.9)

Rubber & Plastics

19,932

(0.9)

Machinery & Equipment

15,587

(1.5)

Mining

12,207

(1.7)

Base Metals

47,292

(1.8)

Wooden Products

44,040

(2.6)

Transportation & Logistics

3,997

(4.1)

Metallic Products

27,103

(13.3)

TSE Top 5 Gainers

Company

Close **

(USD Cents)

% Change

RADI

Radiator Iran Co.

7.8

12.8

SHSI

Sina Chemical Industries Co.

26.7

12.8

KHSH

Electric Khodro Shargh Co.

8.4

12.2

MNGZ

Iran Manganese Mines Co.

10.9

11.7

LAMI

Lamiran Co.

14.8

10.3

TSE Top 5 Value Leaders

Company

Close **
(USD Cents)

Trade Value **

(Million USD)

IKCO

Iran Khodro

6.5

7.5

MARK

Machine Sazi Arak Co.

3.4

6.0

ALIR

Iran Aluminum Co.

3.5

5.7

FOLD

Esfahan Mobarakeh Steel Co.

5.7

4.6

PNES

Esfahan Oil Refining Co.

8.7

3.6

** All figures in USD are converted from IRR at the free market rate

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