Weekly Market Report

Trading Week: 14 – 18 October 2017

Summary

Main Topics

· Stocks rebound, rial stabilizes as Trump’s decision matches expectations

· Base metals, refineries, and car makers boost index

· Iran and Turkey finalize rial-lira swap mechanism

· Oil prices rise on regional tensions; “shale band” may limit growth

· Government oil revenues rise sharply on higher price and weaker rial

Tehran Stock Exchange

The TSE Overall Index rose 1.2% over the week to 85,768 for its first increase in three weeks. As expected by many analysts, US President Donald Trump failed to certify Iran’s compliance with the nuclear deal and sent the case to Congress. This decertification does not imply an automatic US withdrawal from the internationally recognized nuclear deal termed as the Joint Comprehensive Plan of Action. The show of support from Europe and comments from a number of US congressmen suggested that a US exit from the deal af­ter congressional review remains unlikely. The market’s reaction also confirmed the view that market expectations are not for the worst case scenario. The majority of sectors rose this week, including the automotive industry which is very sensitive to foreign relations because of its reliance on imported parts. The automotive index rose 3% but is still down by more than 20% over 12 months.

 

The base metals index climbed 5%, taking its one-year return to 58%. The sector had the largest trading value for the week. Higher global prices plus a weaker rial have led to a significant increase in domestic prices, boosting demand for shares of domestic producers and exporters. Esfahan Mobarakeh Steel Co. (FOLD), the main producer of hot and cold steel rolls with nearly USD 4 billion market cap., rose 9% for the week and was the largest contributor to TEDPIX’s gains each day.

 

Base metals had a new IPO as well. On Wednesday, 5% of shares of South Kish Kaveh Steel Co. (KVEH) was sold to the public by its main shareholder, the Mostazafan Founda­tion. Located in the southern port of Bandar Abbas on the Persian Gulf, KVEH has the advantage of low cost energy to produce sponge iron and billet bar with direct reduced technology. For the fiscal year ending 20 March 2018, KVEH expects to boost production by nearly 50% to 2.4 million tonnes of iron products, of which 1.35 million tonnes would be sold as final products. The unaudited six-month interim report shows that almost 45% of the company’s estimates are already realized. KVEH relies on domestic suppliers for raw materials and forecasts the share of exports in revenues will rise to 74% this fiscal year from 45% last year.

 

Refineries rose 5%. Oil approached USD 60 per barrel again after Iraq’s army took control of oil fields in the formerly Kurdish controlled city of Kirkuk, although oil production was maintained as before. Some traders argue that the so-called “shale band” will prevent the price from rising above USD 60 per barrel, a perceived level where US shale drillers would risk flooding the market.

 

Iran Fara Bourse

In contrast with the TEDPIX, the IFB Overall Index fell 0.1% and closed at 928.6. Big com­panies such as Maroun Petrochemical Co. (PMRZ) and Zagros Petrochemical Co. (PZGZ) had narrow changes. MIDHCO (KHMZ), a holding company with substantial exposure to production of steel-making raw materials, fell 1.6% to extend its one-month decline to nearly 12%.   

 

Foreign Exchange Market

The US dollar rose by 0.5% to around IRR 40,200 after dropping below the 40,000 level. The increase almost mirrored gains in the official rate of 0.4% to IRR 34,299. While Trump’s decision to send Iran’s nuclear case to Congress means at least 60 days of un­certainty, many key US senators have illustrated their willingness to keep the deal.

 

Recent developments around the nuclear deal have made foreign currencies more ap­pealing to some investors. To facilitate exposure to the FX market, the first foreign curren­cy ETF is to be launched soon, according to a SEO official quoted by Iranian news outlets.

 

Economic Development

Iran and Turkey have finalized their rial-lira currency swap agreement, which can gradual­ly eliminate US currency transactions between the two countries. The current limit is 5.0 billion Turkish lira, or nearly USD 1.37 billion. This compares with nearly USD 6.3 billion in bilateral trade in the first seven months of 2017.

 

Iran’s government revenues from oil and gas almost doubled from March to September in rial terms compared to the same year-ago period, according to the CBI’s monthly statistics report. Higher oil prices and the stronger dollar contributed to the increase.

 

The report also showed that the balance of credits in August extended to the public sector gained 25%, and for the private sector rose 22.1%, compared to the same month last year. Private sector bank deposits rose by almost 24.9% in August, down from a year-ago growth rate of 30%. Sight deposits, which account for nearly 10% of private deposits, grew 14.5% and the difference was due to higher growth rate of time and interest-free deposits.

FX Information

Description

18 October 2017

12 October 2017

% Change

Official USD - IRR

34,273

34,149

0.4

Market USD - IRR

40,189

40,198

(0.02)

Official EUR - IRR

40,322

40,552

(0.6)

Market EUR - IRR

47,357

47,708

(0.7)

Official GBP - IRR

45,325

45,263

0.1

Market GBP - IRR

53,300

53,300

0.0

Market Information

Index Info

Close

Unit Change

% Change

%  Change from March 20, 2017

TSE Overall Index - TEDPIX

85,768

1,023

1.2

11.8

TSE30 Index

3,534

78.5

2.3

14.8

Iran Fara Bourse Overall Index

928

(0.8)

(0.1)

6.1

Description

This Period

Last Period

Market P/E

6.9

6.8

Trade Statistics

Description

This Period

Last Period

% Change

TSE Average Daily Trade Vol­ume (Million USD) **

46

52

(11)

IFB Average Daily Traded Val­ue (Million USD) **

39

59

(34)

Industry Index Information

Description

Close

% Change

Mining

12,517

10.2

Paper Products

13,384

8.4

Coal Mining

1,333

6.5

Agriculture

6,840

5.5

Base Metals

46,417

5.0

Oil Products

265,690

5.0

Automotive

16,477

2.8

Metallic Ore

16,344

1.9

Ceramics & Tiles

2,161

1.7

Construction

687

1.6

Machinery & Equipment

15,990

1.5

Other Financial Services

2,170

1.3

TSE All-Share Index

85,768

1.2

IT

12,379

1.2

Rubber & Plastics

21,969

1.1

Telecommunication

1,056

0.5

Metallic Products

31,520

0.4

Utility Service Providers

211

0.3

Wooden Products

49,483

0.3

Chemicals

5,077

0.1

Sugar

8,703

0.1

Machinery & Electric Equipment

486,340

0.1

Cement

654

0.02

Industrial Conglomerates

7,804

0.0

Medical & Measurement Products

10,244

0.0

Textile

1,299

(0.1)

Transportation & Logistics

4,167

(0.1)

Banking

562

(0.2)

Leather Production & Products

2,076

(0.3)

Foods excluding Sugar

3,518

(0.4)

IT & Communications

165

(0.6)

Investment

1,908

(0.8)

Non-Metallic Ores

2,188

(0.9)

Pharmaceuticals

9,051

(0.9)

Insurance

4,840

(1.0)

Engineering Services

665

(1.1)

Oil Drilling & Services

422

(1.7)

Printing & Publishing

191,523

(2.3)

TSE Top 5 Gainers

Company

Close **

(USD Cents)

% Change

KRTI

Iran Carton Co.

15.1

12.4

GSHI

Khorasan Shirin Sugar Co.

51.9

12.3

CRBN

Iran Carbon Co.

8.6

12.0

PABD

Abadan Petrochemical Co.

6.6

10.2

NPRS

Pars Oil Co.

11.0

7.9

TSE Top 5 Value Leaders

Company

Close **
(USD Cents)

Trade Value **

(Million USD)

FOLD

Esfahan Mobarakeh Steel Co.

5.3

12.3

MSMI

National Iranian Copper Ind. Co.

5.5

5.4

KRTI

Iran Carton Co.

15.1

5.1

HWEB

Hi Web

11.1

4.9

BAHN

Shahid Bahonar Copper Ind. Co.

16.8

3.1

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

Turquoise Partners - Firouzeh Asia Brokerage

All Rights Reserved - 2017

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