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March 2018 No 136, Volume 12

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March 2018 No 136, Volume 12 March 2018 - Volume 12, No 136 March 2018: Iran’s National Museum hosts an exhibition from the Louvre for the first time in Tehran. Summary Equity Markets The TEDPIX index and junior Farabourse (IFB) market remained stable in Rial terms and gained 3.6% and 3.9% in US$ terms respectively in the month of February. The foreign exchange market stabilized with IRR appreciating 3.5% against the US$. Debt Markets The fixed income market witnessed an active month with the issuance of a number of Islamic T-bills and government Musharakah and Salaf notes. Total fixed income issued papers soared 37% in IRR terms, taking the value of issued papers to 10 billion US$ in the month of February. Economic Review This issue reviews the recent updates from the Privatization Organization concerning the value of privatized companies and the latest updates from the Central Bank of Iran regarding 9-month real growth in GDP constituents. In addition, we have included sections covering the latest macroeconomic data published by relevant organizations and senior macroeconomic strategists in a fact-sheet report, as well as an economic calendar released by local and international statistics centers. 1 Iran Investment Monthly Table of Contents 3 Market Overview 3 Market Insight 4 Performance & Updates 7 Sector Insight 10 Company Overview 11 Market Snapshot 12 TSE & Junior Market Performance 13 Top Ranked Companies 14 TSE Statistics 14 FX Movements 15 Iran’s Fixed Income Market 17 Economic Review 17 Latest Updates 19 Macroeconomic Data 20 Iran’s Fixed Income Market 23 Turquoise Partners 23 About Turquoise Partners 29 News & Views 2 Iran Investment Monthly Market Overview Market Insight March 2018 - Volume 12, No 136 Market Update February saw the Tehran Stock Exchange (TSE) bounce back from its January decline (which was the steepest monthly decline in EUR terms in almost 5 years), as the overall index rose by 7.3% in EUR terms. Similar to previous month, movements in the EUR/IRR exchange rate were the primary driver behind this month’s moves, where the Rial appreciated by more than 7% versus the Euro to recover half of its YTD losses. On the macro front, the Central Bank of Iran (CBI) took a number of serious measures in February, namely raising interest rates from 15% to 20% for one-year deposits across the entire banking system, in an effort to curb speculative demand for hard currency in the free market. Uncertainty towards the long-term sustainability of the nuclear accord beyond President Trump’s May 12th deadline has increased pressure on the Rial, which in turn has spurred the CBI to intervene Shervin Shahriari and support the currency. Chief Investment Officer On the credit side, government T-bills suffered from the CBI’s tightening policies, where yields rose to their highest level in 6-months. As deposit interest rates appear to have stabilized around the 20% level, we expect this new norm of slightly higher yields for these listed debt instruments to persist. Iranian T-Bills YTM Turning away from the macro environment, and despite the uncertain geopolitical backdrop, equity fundamentals remain very attractive. Historically, a weaker Rial has boosted the bottom line of most TSE companies, with a time lag. Over the past twelve months, the Rial has depreciated by 18% versus the USD, yet the total earnings projections appreciated at a much higher pace of 28%. As currency depreciation continues in 2018, we expect to see a further increase in net profitability for the first half of 2018, especially with regards to sectors that benefit from a weaker currency, such as exporters and commodity players. As the TSE’s Price to Earnings ratio hovers around its long-term historical average of 6x, we believe that the arrival of positive earnings in the coming months can lead to a stock market re-rating. 3 Iran Investment Monthly Market Overview Performance & Update March 2018 - Volume 12, No 136 Performance & Updates Summary - February 2018 Market Capitalization (billion US$) 119 TSE & Farabourse Junior Market Free Float 21% TSE & Farabourse Junior Market Number of Listed Companies1 581 TSE & Farabourse Junior Market TSE Index Performance (US$)2,4 3.6% (MTD)5 -1.8% (YTD) TSE Total Turnover (million US$)2 1,633 m$ TSE & Farabourse Junior Market Dividend Yield (%) 3 11.7% TSE P/E 6.8 x 1 160 companies are listed in Over-The-Counter (OTC) or off-exchange market named as “Base Market” in Farabourse junior market which trading of these companies are done directly between two parties. 2 Calculated based on market IRR per US$ exchange rates. 3 Calculated based on market data ending 1395 Iranian calendar year. 4 TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index). 5 MTD: 28 Feb 2018 Vs. 31 Jan 2018 The TEDPIX index and junior Farabourse (IFB) market remained stable in Rial terms and gained 3.6% and 3.9% in US$ terms respectively in the month of February. The foreign exchange market stabilized with IRR appreciating 3.5% against the US$. The TSE’s total trading volume declined 39% to 833 million US$, and trading on the IFB decreased 28% to 800 million US$ in February. The total number of shares traded declined in both markets by 23% on the TSE and 38% on the IFB. Tehran Stock Exchange & Junior Market Trade Valume1 - February 2018 Iran Farabourse (Junior Market) Trade Volume (million US$) Tehran Stock Exchange (Main Market) Trade Volume (million US$) US$ Million Source: Tehran Stock Exchange Iran Farabourse Company All figures in US$ are converted from IRR at the free market rate 1 Trading volume month on month in US$ term - TSE includes mainly equity while Farabourse has more fixed income instruments and smaller equities. 4 Iran Investment Monthly Market Overview Performance & Update March 2018 - Volume 12, No 136 Tehran Stock Exchange Trade by Value Monthly Change Total: -39% Average: -23% February Total: 833 million US$ Average: 46 million US$ No. Trading Day: 18 January Total: 1,372 million US$ Average: 60 million US$ No. Trading Day: 23 US$ Million Tehran Stock Exchange Trade by Volume Monthly Change Total: -22% Average: -1% February Total: 19,572 million shares Average: 1,087 million shares No. Trading Day: 18 January Total: 25,307 million shares Average: 1,100 million shares No. Trading Day: 23 Shares Million Source: Tehran Stock Exchange All figures in US$ are converted from IRR at the free market rate 5 Iran Investment Monthly Market Overview Performance & Update March 2018 - Volume 12, No 136 Junior Market Trade by Value February Monthly Change Total: 800 million US$ Total: -28% Average: 44 million US$ Average: -8% No. Trading Day: 18 January Total: 1,107 million US$ Average: 48 million US$ No. Trading Day: 23 US$ Million Junior Market Trade by Volume Monthly Change Total: -38% Average: -20% February Total: 5.7 billion shares Average: 321 million shares No. Trading Day: 18 January Total: 9.2 billion shares Average: 403 million shares No. Trading Day: 23 Shares Million Source: Iran Farabourse Company All figures in US$ are converted from IRR at the free market rate 6 Iran Investment Monthly Market Overview Sector Insight March 2018 - Volume 12, No 136 Sector Insight - February 2018 6.1 Automotive 4.0 Metallic Ore 3.6 Other Financial Services 2.4 Wooden Products 2.2 Paper Products % Sector -5.6 Oil Drilling & Services 1 -6.0 Pharmaceuticals Performance -6.5 Engineering Services -7.6 Agriculture -11.2 Financial Markets Management 13.3 x Electric Machinery & Apparatus 13.1 x Motor Vehicles and Auto Pars 11.3 x Sugar 10.3 x Monetary Intermediation - Banks 9.1 x Computer & Related Activities 6.5 x Other non metallic Mineral Products 6.5 x Refined Petroleum Products & Nuclear Fuel P/E 6.4 x Basic Metals 6.1 x Pharmaceuticals 5.9 x Insurance & Pension Funding Except Compulsory Social Security 92% Machinery & Equipment 72% Insurance & Pension Funding Except Compulsory Social Security 57% Chemical & By Products 45% Food Products and Beverages except Sugar 45% Rubber & Plastic Products -31% Other Non-metallic Mineral Products %Trading -34% Metal Ores Mining Value2 -43% Cement, Lime & Plaster -52% Computer & Related Activities -64% Fabricated Metal Products Except Machinery & Equipment’s Source: Tehran Stock Exchange, Note: Sectors with more than 4 companies included (exp. Telecommunication) 1Growth of sector’s index month on month in IRR term. 2Growth of trading volume month on month in US$ term. 7 Iran Investment Monthly Market Overview Sector Insight March 2018 - Volume 12, No 136 Sector Insight: Banking Sector Overview The Banking sector is the fifth largest in the TSE with 11 listed banks and approximately $8 billion in market value. Accelerating digitalization in the commercial sector, in tandem with the government’s efforts to develop the telecommunication and internet infrastructures have aided growth in the banking and finance sectors. The value and volume of internet and mobile transactions are increasing rapidly every month. On the last day of the Iranian calendar year 1396 (March 19, 2018), the CBI announced that in the SHETAB and SHAPARAK payment systems (an electronic card payment and settlement system) the number of financial transactions reached 168 million and 197 million transactions in one day respectively. According to the IMF country report on Iran, the financial and banking sector remains weak due to high NPL ratios and a fall in the capital adequacy ratio (CAR) from 8.4% in March 2012 to 5.8% in March 2015. Iran’s banking sector issues have been discussed and addressed in many economic seminars and articles by senior economic advisors and analysts over the past three years. As a result, the CBI started a restructuring process and brought most unlicensed financial institutions under its supervision, addressing an important source of financial instability.
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