Weekly Market Report

Trading Week: 17 – 21 Feb, 2018

Summary

Main Topics

· Rial jumps as CBI allows one-year bank deposit rate to rise to 20%

· Market-official exchange rate gap narrows to 22% 

· TEDPIX slips 0.2% in mixed week

· Unemployment rises to 11.9% in last quarter of 2017

· New bank loans up 8% in 10 months 

 

Tehran Stock Exchange

The TSE Overall Index (TEDPIX) fell 0.2% to 98,157 in a week of mixed trading as banks started to offer one-year deposits at 20%, boosting the rial by about 4% against the US dollar. The average daily trading volume rose 77% to USD 80 million, partially reflecting the weaker dollar. The week was shortened to four trading sessions because of a public holiday. The TSE30, a measure of large cap companies, declined 0.4% to trim its return since last March to 41.2% compared with 27.9% for the TEDPIX.

 

The market was mixed, similar to last week. Metallic Ore was the leading sector, gaining 4.2%. Also rising were Oil Products (+0.7%), Foods ex. Sugar (+0.7%), Automotive (+0.4%) and Telecommunication (+0.3%). Major indices to fall included Chemicals (-0.2%), Engineering (-0.8%), Banking (-0.8%), Base Metals (-1.7%), and Pharmaceuticals (-2.4%).

 

The Metallic Ore index is up nearly 50% over 12 months and all but one of its constituents ended the week higher. The twin iron ore suppliers, Golgohar Mining & Industrial Co. (GOLG) and Chadormalu Mining & Industrial Co. (CHML), climbed 5% and 2.7% respec­tively. GOLG released its unaudited nine-month results for the fiscal year ending March 20 that showed revenues up 87% (in rial terms) to USD 779 million and net income up 124% to USD 288 million compared with the same year-ago period. Its latest full-year net in­come estimate is USD 431 million.

 

GOLG’s increases in sales and profits are driven by higher sales prices and volumes, and an encouraging shift towards value-added products. During the nine-month period, total production volume rose 24% to nearly 18 million tonnes. Sales of pellet increased 71% to 8 million tonnes while sales of relatively raw materials such as iron ore concentrates de­clined compared to last year. GOLG ended the week with a market cap of USD 2.4 billion and a forward P/E of 5.7x.

 

Refineries gained or were little changed. Global prices of oil have been volatile recently, while increases in the dollar’s official exchange rate have supported profitability of the sec­tor. Refineries sell most of their products to the government at the official rate. Bandar Ab­bas Oil Refining Co. (PNBA) added 3.2% while Tabriz Oil Refining Co. (PNTB) gained 1.3%. Tehran Oil Refining Co. (PTEH) and Esfahan Oil Refining Co. (PNES) ended the week little changed.

 

Saipa Diesel Co. (SPDZ), a major truck producer, added 12% to take its gains over two weeks to 33%. The sharp rise prompted the TSE to ask SPDZ to disclose any significant information. It responded that there were no new developments affecting net income “for the current fiscal year” which ends March 20.

 

Mobarakeh Steel Co. (FOLD), the largest hot rolled steel producer, fell 4% and was a ma­jor drag on the Base Metals index. The index fell 1.7% this week but is still up nearly 70% over one year. FOLD released nine-month results for the fiscal year ending March 20 showing revenues rose 53% (in rials), compared to the same period last year, to USD 2.45 billion. Net income more than tripled in the same period to USD 814 million. FOLD ended the week with a market cap of USD 4.8 billion and a forward P/E of 4.2x.

 

Iran Fara Bourse

The IFB Overall Index dropped 1%, mainly due to a 1.9% fall in large-cap Marun Petro­chemical Co. (PMRZ). The largest listed olefin producer, with a market cap of USD 3.6 billion, released its unaudited nine-month results for the fiscal year ending March 20 show­ing revenues up 37% (in rials) compared to the same period last year to USD 851 million while net income rose 21% to USD 290 million. Net income does not include investment income from its subsidiary Laleh Petrochemical Co. which reported net income for its own fiscal year that ended December 2017 at USD 33 million. PMRZ accounts for nearly 25% of the market cap of IFB, making the IFB Overall Index sensitive to the performance of this single company.

 

Middle East Mines Industries Development Holding Co. (KHMZ), an investor in steel raw materials suppliers and projects, declined 1%. According to its interim report released this week, KHMZ produced 3.25 million tonnes of iron ore concentrate and 2.89 million tonnes of pellet in the nine months to December 2017, giving it a domestic market share of nearly 10% for both products.

 

Esfahan Steel Co. (ZOBZ), the main steel construction profiles producer, fell 2.5%.  IFB-listed refineries Shiraz Oil Refining Co. (PRZZ) and Lavan Oil Refining Co. (PNLZ) were little changed for the week. 

 

Foreign Exchange Market

The rial jumped against major currencies, signaling success   for the Central Bank of Iran (CBI) and its new package of forex policies. The dollar dropped 4.2% on the open market to IRR 45,214. The gap between the market and official exchange rates narrowed to 22% from 27% as the CBI raised its official rate by 0.3% to IRR 37,210.

 

The CBI allowed banks to open one-year deposits at 20% with monthly payments. The new rate is 5.0 percentage points higher  than the ceiling currently allowed by the CBI for one-year deposits. This essentially means a temporary  (until March 1) increase in interest rates, which is a reversal of the CBI’s previous stated policy of trying to lower interest rates.

 

The CBI’s package includes two other initiatives. One is a certificate of deposit in rial terms but with its value linked to either the euro or the US dollar based on the buyer’s choice. These deposits would have maturities of one and two years with interest rates of 4% and 4.5% respectively, paid semi-annually. The exchange rate used to price these deposits would be based on the 30-day average of the rates prevailing in the CBI’s SANA Weighted Average platform (publicly accessible at sanarate.ir). SANA’s rate is a measure of market exchange rates and is different from the CBI’s official rate. 

 

The third initiative announced by the CBI to manage the FX market is forward selling of gold coins with six-month and one-year maturities at fixed and preferential rates. Buyers should pay nearly 90% of the current price of gold coins and pay the difference with the market price on settlement day.

 

Economic Development

Iranian banks extended nearly USD 102 billion in new credits in the 10 months to January 2018, the CBI reported. This is 8% higher (in rials) than the same period last year, which is not out of line considering an inflation rate of around 10%. The details show that financ­ing of working capital accounted for 62% of all new loans, by far the largest share of total loans. The service sector and Industry & Mines received most of the loans, accounting for 40% and 27% respectively.

 

Unemployment rose to 11.9% in the last quarter of 2017 from 11.7% in the third quarter, the Statistical Center of Iran reported. However the jobless rate is still down from 12.3% a year earlier. Unemployment for the age group 15 to 29 years rose to 25% from 24.4% in the third quarter and compares with 26.6% a year earlier. The labor force participation rate was little changed at 40%. 

FX Information

Description

22 February 2018

15 February 2018

% Change

Official USD - IRR

37,210

37,091

0.3

Market USD - IRR

45,214

47,204

(4.2)

Official EUR - IRR

45,682

46,233

(1.2)

Market EUR - IRR

55,588

59,459

(6.5)

Official GBP - IRR

51,764

51,997

(0.4)

Market GBP - IRR

66,455

68,299

(2.7)

Market Information

Index Info

Close

Unit Change

% Change

%  Change from March 20, 2017

TSE Overall Index - TEDPIX

98,157

(190)

(0.2)

27.9

TSE30 Index

4,346

(17)

(0.4)

41.2

Iran Fara Bourse Overall Index

1,097

(10)

(1.0)

25.3

Description

This Period

Last Period

Market P/E

7.5

7.5

Trade Statistics

Description

This Period

Last Period

% Change

TSE Average Daily Trade Vol­ume (Million USD) **

80

45

77

IFB Average Daily Traded Val­ue (Million USD) **

66

34

94

Industry Index Information

Description

Close

% Change

Metallic Ore

21,240

4.2

Industrial Conglomerates

9,965

1.4

Printing & Publishing

206,556

1.2

Paper Products

11,082

0.9

Oil Products

360,791

0.7

Foods excluding Sugar

3,318

0.7

Investment

2,055

0.5

Automotive

17,052

0.4

Telecommunication

1,120

0.3

Utility Service Providers

231

0.3

Machinery & Electric Equipment

486,107

0.2

IT & Communications

231

0.0

Medical & Measurement Products

10,244

0.0

Mining

12,058

0.0

Construction

686

(0.0)

Textile

1,259

(0.1)

IT

12,609

(0.1)

Metallic Products

22,375

(0.1)

TSE All-Share Index

98,157

(0.2)

Chemicals

6,340

(0.2)

Ceramics & Tiles

1,795

(0.4)

Machinery & Equipment

16,618

(0.5)

Sugar

9,109

(0.6)

Cement

584

(0.6)

Transportation & Logistics

3,624

(0.6)

Engineering Services

688

(0.8)

Banking

548

(0.8)

Insurance

4,387

(1.0)

Rubber & Plastics

18,952

(1.1)

Other Financial Services

2,171

(1.1)

Non-Metallic Ores

2,217

(1.1)

Base Metals

59,121

(1.7)

Leather Production & Products

1,954

(1.9)

Agriculture

5,737

(2.2)

Pharmaceuticals

8,182

(2.4)

Financial Markets Management

71

(3.2)

Oil Drilling & Services

376

(3.8)

Wooden Products

71,684

(4.7)

Coal Mining

1,582

(6.5)

TSE Top 5 Gainers

Company

Close **

(USD Cents)

% Change

PABD

Abadan Petrochemical Co.

5.8

12.8

BHSM

Behceram Granite Co.

5.7

12.7

SPDZ

Saipa Diesel Co.

2.1

12.4

MESI

Mehvar Sazan Iran Khodro Co.

5.0

11.4

HFRS

Persian Gulf Intl. Trans. Co.

5.4

4.4

TSE Top 5 Value Leaders

Company

Close **
(USD Cents)

Trade Value **

(Million USD)

SHOY

Behshahr Industrial Dev. Corp.

8.1

9.3

FOLD

Esfahan Mobarakeh Steel Co.

6.3

4.0

IKCO

Iran Khodro

6.2

3.7

MADN

Mines and Metals Dev. Inv. Co. 

4.1

3.6

PNBA

Bandar Abbas Oil Refining Co. 

16.0

3.1

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

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