Summary

Equity Markets The TEDPIX index and junior Farabourse (IFB) market expanded 19% and 21% in IRR terms over the month, respectively. Based on the unofficial exchange rate, the month-on-month gain in dollar terms accelerate by 8% in TSE and 10% in Farabourse market. This was mainly due to 10% depreciation of IRR exchange rate over the month.

Debt Markets For the start of the Iranian calendar year (March 2019) to end-February 2020, total issuance on the fixed income market reached 6.5 billion US$ based on the unofficial exchange rate. Yield to maturity (YTM) remained stable at 20.87% at the end of February.

Economic Review This issue reviews the updates on unemployment and economic participation rate by

March 2020 - Volume 14, No158 Statistical Center of . In addition, we have included a separate report covering the latest macroeconomic data published by relevant organizations and senior macroeconomic strategists in a fact-sheet summary, 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 Update

5 Performance & Updates

6 Historic Trends & Sector Insight

7 Industry at a Glance

8 Market Snapshot

9 TSE & Junior Market Performance

10 Top Ranked Companies

11 Iran’s Fixed Income Market 13 Economic Review

13 Latest Updates

15 Macroeconomic Data 16 News & Views

16 Recent Brokerage Reports

16 Turquoise News

2 Iran Investment Monthly Market Overview March 2020 - Volume 14, No 158

Market Update

The Stock Exchange (TSE) continued its positive performance in February, the best performing month since October 2019 in local currency terms, as the overall index rose by 19% in Iranian Rial. Retail money continued to flow in to the stock market as the geopolitical tension somewhat eased and the gradual Rial depreciation continued. In USD terms, however, the index gained 8% in value.

As a result of recent rally in the stock market, a divergence has been emerged between the stock prices and their underlying fundamentals. The chart below indicates a market clear deviation of the overall index path and total earnings of the listed companies. The gap specifically has widened recently, post October 2019.

TSE Overall Index & Listed Firms Profits (Normalised in IRR) Shervin Shahriari Chief Investment Officer

Listed Companies Profit Index Overall Index

Mar-17 Aug-17 Nov-17 Mar-18 Aug-18 Nov-18 Aug-19 Nov-19 Feb-20 Source: TSE

Looking forward, evidently the global events such as corona-virus outbreak will have an effect on Iranian businesses and companies’ sales numbers.

According to the EIA’s Short-Term Energy Outlook (STEO), the global liquid fuels demand has been revised down by 378,000 b/d compared to the January 2020 edition. Flight cancellations, reduction in other transportation fuels’ demand in China and the weaker growth prospects in China are key factors contributing to lower economic activities and lower oil price in 2020.

3 Iran Investment Monthly Market Overview March 2020 - Volume 14, No 158

Revisions to Global Petroleum Consumption Forecast (2020) Thousand barrels per day

China Rest of the World

J F M A M J J A S O N D

Source: EIA

Despite all the systemic risks surrounding the economy, the Central Bank of Iran (CBI) has been able to curb the uprising volatility in the currency market that came after corona-virus and consequent falling oil prices. Daily fluctuations have been limited significantly with the USD/IRR at around 150,000 IRR per USD through end of Feb 2020. On a larger scale, the local currency depreciated by around 11% in 1398 Iranian calendar year (March 2019 – March 2020) compared to 67% decline over the same period last year. The chart below compares the currency fluctuations over the course of the past two Iranian calendar years.

IRR per USD

Feb 2019 - Feb 2020 Feb 2018 - Feb 2019

11%

67%

Source: Bonbast

4 Iran Investment Monthly Market Overview March 2020 - Volume 14, No 158

Performance & Updates

11 - Year Average (2008-2020)1 Market Capitalization (billion US$) 2 109 TSE & Farabourse Junior Market P/E 6.7 x TSE Dividend Yield (%) 11 % TSE Market Cap / GDP 36 % TSE & Farabourse Dividend Growth Rate 23 % TSE Total Turnover (billion US$), Average Annual 16 TSE TSE Overall Index Average Annual Growth (US$) 17 % TSE

1 Annual data from 2008 to February 2020 2 Calculated based on unofficial IRR per US$ exchange rates.

Summary - February 2020 Market Capitalization (billion US$) 167 TSE & Farabourse Junior Market Free Float 22% TSE & Farabourse Junior Market Number of Listed Companies1 623 TSE & Farabourse Junior Market

TSE Index Performance (US$)2,4 8% (MTD) 19% (YTD) TSE Total Turnover (million US$)2 6,903 TSE & Farabourse Junior Market Dividend Yield (%) 3 6.3% TSE P/E 10.2 x

1 172 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 unofficial IRR per US$ exchange rates. 3 Calculated based on the latest market data 4 TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index)

Tehran Stock Exchange & Junior Market Trade by Value1 - February 2020

Iran Farabourse (Junior Market) Trade Volume (million US$)

Tehran Stock Exchange (Main Market)Trade Volume (million US$)

Since the beginning 2020, the market has expanded to the upside recording the YTD performance of the TSE and IFB to 35% and 32% in IRR terms respectively. The gain in hard currency terms is 19% on the TSE and 17% on the IFB on a year to date basis. In February 2020, the TSE equity trade value expanded to 5156 million US$ from the 2640 million US$ historic 12-month average. The total number of shares traded on the TSE expanded by 46% compared to the one-year historic average of 87 billion shares. . 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.

5 Iran Investment Monthly Market Overview March 2020 - Volume 14, No 158

Historic Trends & Sector Insight

Long-Term Overall Index (Normalized in USD) Long-Term Iranian Market Cap ( Normalized in USD)

February 2020: 288 Historic Average: 162 Historic Average: 157 February 2020 : 253

TSE Best Performing Sectors & Overall Index (Normalized in USD)

Metals Mining 113 Pharma 113 Overall 112

107

TSE Large Sectors (% Market Capitalization)

22% 14% 9% 8% 7% 5% 5% 4% 26% Other Mining Banks Metals* Pharma Telecom Chemicals Petroleum Diversified

Source: TSE, Bonbast, as of Feb 2020 *Metals sector includes steel, copper and aluminum

6 Iran Investment Monthly Market Overview March 2020 - Volume 14, No 158

Industry at a Glance - February 2020

1 Year Return 3-Year Return 5-Year Return Top Performing Companies Market Cap Sector Trailing (%) Trailing (%) Trailing (%) in February 2020 (MOM %) (Million USD) in USD in USD in USD

Kavian Steel Co. 212 96% 38% - Metals* Sepahan Industrial Group 103 230% 70% -12%

Sadid Industrial Group 265 193% 380% 714%

Golgohar Mining 3,310 17% -69% -46%

Mining Chadormalu Mining 2,612 50% -80% -55%

Bafgh Mining Co. 248 3% 85% 142%

Sepahan Oil 482 -58% -56% -67%

Petroleum Iranol 202 117% -51% -68%

Tabriz Refinery 1,045 125% 107% -52%

Loabiran 40 739% 61% 168%

Chemical Nirouchlor 114 269% 106% 29%

Iran Mineral Salts 187 57% 3% 3%

Saman Bank 329 224% 6% -26%

Banks 296 137% -57% -50%

Day Bank 224 487% 98% 32%

TSE Large Sectors 5-Year Performance (Normalized in USD) Metals Mining 221 Petroleum Chemical

Banks 163

136 136

73

Source: TSE, Bonbast, as of ending February 2020 *Metals sector includes steel, copper and aluminum

7 Iran Investment Monthly Market Overview March 2020 - Volume 14, No 158

Market Snapshot -February 2020 Iran & Regional Markets

Iran: A 25-Year Snapshot, Asset Class Annualized Return in US$ (%) P/E Multiple Comparison 11% MSCI Morocco 20.7 Kuwait 16.2 Qatar 13.1 6% MSCI Arabian Markets 14.7 5% MSCI GCC Countries 14.8 MSCI Egypt 9.5 1% Saudi Arabia 17.3 UAE 9.5

% Iran 10.2 Turquoise Iran Fund* 5.7 Sub Fund B/C, as of ending January 2020 Note: Annual data from 1995 to February 2020 Source: CBI, TSE, IFB All figures in US$ are converted from IRR at the free market rate

Iran & International Markets

3 4 Tehran Stock Exchange MSCI Emerging Markets MSCI Frontier Markets

Average P/E Average P/E Average P/E 10.2 14.0 12.6 1 1-Year Performance in $ 1-Year Performance in $ 1-Year Performance in $ 180.4% -1.5% 5.4% Annualized 10 Year in $ 2 Annualized 10 Year in $ Annualized 10 Year in $ 10.7% 3.5% 4.7%

22.4 Chemicals 23.5 Financials 54.8 Financials 13.7 Basic Metals 16.4 Information Technology 13.1 Communication Services 8.9 Refined Petroleum 14.6 Consumer Discretionary 9.9 Real Estate 7.6 Metal Ores Mining 11.9 Communication Services 6.7 Consumer Staples 7.3 Monetary intermediation 7.0 Materials 4.4 Materials

Sector Breakdown (%) 40.1 Others Sector Breakdown (%) 26.6 Others Sector Breakdown (%) 11.1 Others

1.TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index) performance calculated in US$ for the Period of Feb 2019 to Feb 2020 2.TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index)10 year annualized performance calculated in US$ 3.MSCI Emerging Markets Index (US$) - Feb 2020 4.MSCI Frontier Markets Index (US$) - Feb 2020 Source: Tehran Stock Exchange - Central Bank of Iran - MSCI Inc., Kamcoonline. All figures in US$ are converted from IRR at the free market rate, unless otherwise indicated.

8 Iran Investment Monthly Market Overview March 2020 - Volume 14, No 158

TSE & Junior Market Performance Tehran Stock Exchange: TEDPIX*, February 2020

Normalised in US$ Normalised in US$

Volume million shares Million Shares

Source: Tehran Stock Exchange *TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index) All figures in US$ are converted from IRR at the free market rate, unless otherwise indicated.

Iran Farabourse (Junior Market): IFX*,February 2020

Normalised in US$ Normalised in US$

Volume million shares Million Shares

Source: Iran Farabourse Company *Iran Farabourse (Junior Market) Overall Index (Total Return) All figures in US$ are converted from IRR at the free market rate, unless otherwise indicated.

9 Iran Investment Monthly Market Overview March 2020 - Volume 14, No 158

Top Ranked Companies - February 2020 Turnover Value % Total Turnover (million US$)

Founded in 1962, Industrial Group (also known as IKCO) 0.3% is the leading Iranian vehicle manufacturer. IKCO produces c.65% ofIran Khodro 17.1 all domestic vehicles, and is the largest automotive manufacturer in the Middle East.

Parsian Bank is a financial and banking services institution, 0.2% established in 2001. The company was one of the first 12.8 banks to be established in Iran after in 1979.

I.R.I Shipping Lines (IRISL) was established in 1967 I.R.I Marine Co. 0.2% and currently has a fleet of more than 110 vessels 12.7 that are active in the transportation of various cargo types.

Founded in 2003 and privatized in 2009, HiWeb the company has a government contract 0.2%

Top 5 Traded by Value Traded 5 Top to provide high speed internet services to 8.5 25,000 villages across Iran over 10 years. In 2017, HiWeb was listed on the Tehran Stock Exchange in the Middle East. Pars Khodro Founded in 1956 as Trading 0.1% Co, the Pars Khodro Group is 7.3 one the leading Iranian vehicle manufacturer. Market Cap % Total Market Cap. (million US$) Persian Gulf PGPIC was established in the first phase of the privatization of Iran’s Petrochemical 5.1% petrochemical sector when the National Petrochemical Company (NPC) Industry 6,246 transferred its shares in a number of petrochemical companies to PGPIC, paving the way for the formation of Iran’s first private petrochemical holding company. NPC has continued in its role as a policy making body.

Esfahan , one of the largest industrial Mobarakeh Steel complexes in the country, started its operation in 1991 with a nominal Manufacturing 5,423 4.4% capacity of 2.4 million tons per annum. The company produces more than 50% of Iran’s steel and operates in seven industrial complexes.

In 1972, Sarcheshmeh Copper Mines Joint Stock Co of National Iranian Kerman was established and, later, in 1976, it was renamed 3.4% to National Iranian Copper Industries Co. to cover all copper Copper Ind. Co. 4,158 mines operations throughout the country. This company is active in extraction & utilization of copper mines, production of copper concentrates & manufacturing copper products. Golgohar Mining Founded in 1991, Golgohar Mining & Industrial and Industrial 2.2% Company is one of the largest iron ore and iron Company 2,634 pellet producers in Iran. The company operates in combined plants among six iron mine zones about 55 km southwest of Sirjan city near Kerman province.

Top 5 by Market Capitalization Top Mapna Group is the largest and most well- known Iranian enterprise operating in the Mapna 2.1% construction and development of thermal 2,591 power plants under the EPC scheme, as well as independent power plants (IPP), oil & gas, and rail transportation projects.

Source: Tehran Stock Exchange, Firouzeh Asia Brokerage. All figures in US$ are converted from IRR at the unofficial rate.

10 Iran Investment Monthly Market Overview March 2020 - Volume 14, No 158

Iran’s Fixed Income Market For the start of the Iranian calendar year (March 2019) to end-February 2020, total issuance on the fixed income market reached 6.5 billion US$ based on the unofficial exchange rate. Yield to maturity (YTM) remained stable at 20.87% at the end of February.

Iran’s Debt Securities Market - February 2020* 0.7 6.8 Tehran Stock Exchange Iran Farabourse (Junior Market)

Market Value (billion US$)* 4.1 38.5 Tehran Stock Exchange Iran Farabourse (Junior Market)

Average Daily Trading Value (million US$)*

629,450 6,329,000 Tehran Stock Exchange Iran Farabourse (Junior Market)

Average Daily Trading Volume (bonds)

* As of Bahman 1398 (21 Jan 2020 - 19 Feb 2020)

Value & Breakdown of Sukuk Issuance in Iran’s Capital Markets, 2020 (1398)** - (billion US$)

56% 29% 8% 6%

Islamic T-bills Other Salaf (Salam) Sukuk Musharakah Sukuk

Source: Iran Farabourse **Calculated by the unofficial exchange rate in the period of issuance, percentages have been rounded and may not total to 100.

11 Iran Investment Monthly Market Overview March 2020 - Volume 14, No 158

Iran’s Fixed Income Market

Snapshot of the Highest Yielding Debt Securtites1 - February 2020

Issuer Type YTM (p.a.) Maturity

Government Treasury-bill 0.197 3-Jan-22

Government Treasury-bill 0.197 19-Jul-21

Government Treasury-bill 0.196 31-Jan-22

Corporate Mosharekat 0.195 19-Jul-22

Government Treasury-bill 0.195 8-Nov-21

Government Treasury-bill 0.194 8-Jun-22

Government Treasury-bill 0.194 20-Oct-21

Government Treasury-bill 0.193 25-Jul-22

Corporate Treasury-bill 0.193 9-Aug-21

Government Treasury-bill 0.192 9-May-22

1 This snapshot is a selection of the highest yielding securities with minimum one year maturity in Iran’s debt markets and should not be considered as a solicitation or recommendation by Turquoise Partners.

Iran’s T-bills YTM in IRR Term

Feb 2020 20.87%

Source: Tehran Stock Exchange - Iran Farabourse

12 Iran Investment Monthly Economic Review March 2020 - Volume 14, No 158

Latest Updates Unemployment According to the recent report by the Statistical Center of Iran, the unemployment rate (15 yrs. above) reached 10.6 percent in Autumn 2019, showing a decrease of 1.1 percentage point the same period last year. The unemployment rate reached its peak of 13.5 percent in 2010 and since then it has roughly been following a downward trend although with minor fluctuations. Unemployment Rate (%)

Labor Market Overview - Autumn 2019

Population Older than 15 Yrs. 61.7 million 56% 44%

Inactive Active (Economic Participation) 34.4 million 27.3 million

11% 89% Unemployed Employed 2.9 million 24.4 million

4% 41% 56%

Absent Part-time: less than Full-time: 0.9 million 44 hours per week 44 hours per 10.0 million week 13.6 million Source: SCI

13 Iran Investment Monthly Economic Review March 2020 - Volume 14, No 158

The economic activity rate, the ratio of the total number of employed and unemployed (15 yrs. above) to the number of working age population (15 yrs. above), reached 44.3 percent in December 2019, showing a 0.2 percentage point decrease from the same period last year. Based on the report, the economic activity rate is higher in rural areas (47.7 percent) than in urban areas (43.2 percent), while the unemployment rate (15 yrs. above) of 7.1 percent in rural areas is lower than of 11.8 percent in urban areas.

Another factor about the Iranian labour market is that the economic activity rate for female is 17.5 percent and for male is 71.0 percent and therefore the unemployment rate for different age groups of females is higher than the comparable unemployment rate for males.

The unemployment rate for the youth population (between ages of 15 and 24) showed a decline from 27.0 percent in Autumn 2018 compared to 25.8 percent ending Autumn 2019.

Regarding sectoral employment, the services sector contributes the most to employment with 50.0 percentage share of total employment, while industries and agricultures contribute 32.9 percent and 17.1 percent share of employment respectively.

14 Iran Investment Monthly Economic Review March 2020 - Volume 14, No 158

Macroeconomic Data Iran Economic & Market Data Data Macroeconomic Forecast Calendar Unit 2020/ 21 2021/ 22 2022/ 23

SCI: CPI by Provinces in the Month of Nominal GDP (Billion US$) 463 476 496 Bahman of the Year 1398 Released: 2 March 2020 Real GDP Growth (%) 0.0 1.0 1.0 SCI: National Consumer Price Index by Expenditure Deciles: in the Month of Inflation (%) 31 29 27 Bahman of the year 1398 Released: 2 March 2020 Government Net Lending Borrowing (% GDP) -5.0% -5.6% -6.1% SCI: A Selection of Labour Force Survey Results: Autumn 1398 Current Account Balance (% GDP) -3.4% -3.4% -3.3% Released: 5 February 2020

Actual Macroeconomic Data Unit Period Value Comments

Population Growth % 2011- 2016 1.24% -

Fall Unemployment Rate % 10.60% - 2019

Inflation Rate % Mar-20 (Y/Y) 34.8% 2016 = 100

9m 1398 Non-oil GDP Growth % 0.0% 2011 = 100 (Mar-Dec 2019) 9m 1398 GDP Growth % -7.6% 2011 = 100 (Mar-Dec 2019)

Sources: IMF, Central Bank of Iran, Statistical Center of Iran

15 Iran Investment Monthly News & Views March 2020 - Volume 14, No 158

Recent Brokerage Report Turquoise News

Iran Daily Market Update – March 2020 February 9, 2020 The Turquoise Venture Capital Fund started its public March 18, 2020 market subscription on the Iran Farabourse exchange from Feb 9th, 2020 for a period of 7 days. The Fund however was March 17, 2020 oversubscribed on the 3rd day and was able to raise money March 16, 2020 from a solid mix of both institutional and private investors. This public market subscription set a record within the Iranian capital March 15, 2020 markets for the venture capital funds, which was a positive news for the Iranian start-up ecosystem. March 14, 2020 More Information in Persian

October 2, 2019 Turquoise Partners unveiled an online system to ease investment in start-ups at Iran National Library. More Information

September 17, 2019 On Tuesday, September 17, 2019, the Director of Trade, Investment and Innovation Department at the United Nations Industrial Development Organization (UNIDO) and his colleagues had a meeting with Turquoise Partners. In this meeting, which was held at the Turquoise Office, entrepreneurial opportunities in the Iranian tech scene and frontier markets were discussed. More Information

16 Iran Investment Monthly News & Views March 2020 - Volume 14, No 158

Asset • EU Regulated Equity Fund Management • EU Regulated Fixed Income Fund • Domestic Fixed Income Fund • Domestic ETF TSE-30 • Domestic Mutual Fund • Managed Accounts

Investment • Banking Services • M&A • ECM • DCM • Private Placement • Institutional Equity Sales • Retail Equity Sales • Market Entry Strategy

Principal Strategic Investments

17 Iran Investment Monthly March 2020 - Volume 14, No 158 Turquoise Partners 7th floor, Mahdyar Building, Salehi Street, Niavaran Ave. Tehran, Iran Tel: + 98 21 22 70 62 38 Fax: +98 21 881 07 746 Email: [email protected]

Firouzeh Asia Brokerage 5th Floor No. 11, Mirza Hassani St. Ghaem Magham Farahani Ave. Tehran, Iran Tel: +98 21 881 06 106 Fax: +98 21 881 07 746 Email: [email protected]

DISCLAIMER This document has been issued by Turquoise Partners for information purposes only and is not to be construed as a solicitation or an offer to purchase or sell any security or other financial instrument or to any particular category of investors in jurisdictions in which such an offer or solicitation to the public or to any particular category of investors is illegal. Although the material in this report is based on information that Turquoise Partners considers reliable, Turquoise Partners does not make any warranty or representation (express or implied) in relation to the accuracy, completeness or reliability of the information contained herein. Any opinions expressed herein reflect a judgment at the date of publication and are subject to change. Turquoise Partners accepts no liability whatsoever for any direct, indirect or consequential loss or damage of any kind arising out of the use of all or any of this material. Where Turquoise Partners provides information in the document, it is provided exclusively for information purposes. The information does not constitute any form of recommendation related to the personal circumstances of investors or otherwise, nor does it constitute any specific or general recommendation to buy, hold, or sell financial instruments and does not thus create any relationship between Turquoise Partners and any investor. The document may not include all the up-to-date information required to make investment decisions. Other more accurate and relevant sources of information may exist. Investors should thus diligently inform themselves about the chances and risks of the investments prior to taking investment decisions. In addition to the financial aspects, this should include, in particular, the legal and tax aspects of the investments. It is strongly recommended that any potential investor should contact a financial adviser and, where required, a lawyer or tax adviser. Furthermore, it should also be considered that the future performance of financial instruments and their return cannot be inferred from their past performance. The value of investments may go down as well as up and investors in financial instruments should be capable of bearing a total loss of investment. Neither Turquoise Partners nor any third party content provider shall be liable for any errors, inaccuracy, delay or updating of the published content of the provided document. Turquoise Partners expressly disclaims all warranties as to the accuracy of the content provided, or as to the use of the information for any purpose, as far as legally possible. This material is for the use of intended recipients only and neither the whole nor any part of this material may be duplicated in any form or by any means. Neither should any of this material be redistributed or disclosed to anyone without the prior consent of Turquoise Partners. PERSONS DOMICILED, RESIDENT OR BASED IN THE UNITED STATES OF AMERICA ITS TERRITORIES OR POSSESSIONS OR WHO MAY OTHERWISE BE CONSIDERED AS UNITED STATES PERSONS, INCLUDING REPRESENTATIVES OF UNITED STATES COMPANIES OR NON-UNITED STATES SUBSIDIARIES OF UNITED STATES COMPANIES SHOULD NOT CARRY OUT ANY ACTION IN BREACH OF U.S. SANCTIONS LAWS.

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