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December 2018 No 144, Volume 13

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December 2018 No 144, Volume 13 December 2018 - Volume 13, No 144 Summary Equity Markets The TEDPIX index and junior Farabourse (IFB) market lost 11% and 12% respectively in IRR terms over the month. Based on the unofficial exchange rate, the month-on-month gains in dollar terms accelerate by 17% in TSE and by 16% in Farabourse market. This was mainly due to 24% appreciation of IRR exchange rate over the month. Debt Markets From the start of the Iranian calendar year (March 2018) to end-November, total issuance on the fixed income market reached 2.6 billion US$ based on the unofficial exchange rate. Yield to maturity (YTM) remained stable at 24.2% at the end of November. Economic Review This issue reviews the latest updates from Tourism sector and Central Bank report on the inflation. 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 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 18 Macroeconomic Data 19 Turquoise Partners 19 About Turquoise Partners 24 News & Views 2 Iran Investment Monthly Market Overview Market Insight December 2018 - Volume 13, No 144 Portfolio Manager Comments The Tehran Stock Exchange had a very challenging month in November with performance hitting lows not seen since October 2008 as the overall index slid by 8.6% in Euro terms. Volatility in global commodity prices and in particular the drop in the price of Oil contributed to the sell off we experienced in the Iranian equity market in November. On the currency side, unofficial and official rates (CBI Market Rate), Rial value appreciated by the most in 2018 on a monthly basis versus Euro, 23% and 2.3% percent respectively. A stronger currency is usually considered to be seen as a negative factor for the equity holders as the profitability of many large blue-chip listed companies are heavily relied on exports. Furthermore, this stronger Rial translates to a less competitive advantage for Iranian exporters who are Shervin Shahriari Chief Investment Officer already suffering from US sanctions’ restrictions and a decline in global commodity markets. Petroleum products and chemicals were the worst performers in November losing 18% and 12% of the value of their sub-indices. However, defensive sectors such as telecoms performed very well and increased by 13% in Euro terms. According to our currency projection model which takes in to account all the hard currency inflows and outflows, Rial appreciation has run its course for the time being. Therefore, we do not expect any significant further currency appreciation in the short run if the current assumptions which include i.e. oil prices and the amount of oil Iran is able to export due to the re-imposing of sanctions. With all of these considerations in mind, we believe the pullback in the equity market to be short lived as the correlation between two markets is very strong. 3 Iran Investment Monthly Market Overview Performance & Update December 2018 - Volume 13, No 144 Performance & Updates Summary - November 2018 Market Capitalization (billion US$) 72 TSE & Farabourse Junior Market Free Float 22% TSE & Farabourse Junior Market Number of Listed Companies1 594 TSE & Farabourse Junior Market TSE Index Performance (US$) 17.0% (MTD) -37.1% (YTD) TSE Total Turnover (million US$)2 1,441 m$ TSE & Farabourse Junior Market Dividend Yield (%) 10.7% TSE P/E (ttm) 9.3 1 168 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 ending 1396 Iranian calendar year. 4 TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index) The TEDPIX index and junior Farabourse (IFB) market lost 11% and 12% respectively in IRR terms over the month. Based on the unofficial exchange rate, the month-on-month gains in dollar terms were 17% on the Tehran Stock Exchange (TSE) and 16% on the Farabourse market. The Rial exchange rate against USD declined by 24% during November. The TSE’s total trading volume declined by 50% reaching 862 million US$ in November based on the unofficial exchange rate. Trading on the IFB fell by 36% on a monthly basis at 580 million US$, based on the unofficial rate. The total number of shares traded on the TSE declined by 50% reaching 38 billion shares, and on the Farabourse market decreased by 42% to 14 billion shares. Tehran Stock Exchange & Junior Market Trade by Value1 - November 2018 Iran Farabourse (Junior Market) Trade Volume (million US$) 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 unofficial 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 December 2018 - Volume 13, No 144 Tehran Stock Exchange Trade by Value Monthly Change Total: -50% Average: -39% November Total: 862 million US$ Average: 48 million US$ No. Trading Day: 18 October Total: 1,748 million US$ Average: 79 million US$ No. Trading Day: 22 US$ Million Tehran Stock Exchange Trade by Volume Monthly Change Total: -50% Average: -39% November Total: 38,275 million shares Average: 2,126 million shares No. Trading Day: 18 October Total: 77,357 million shares Average: 3,516 million shares No. Trading Day: 22 Shares Million Source: Tehran Stock Exchange All figures in US$ are converted from IRR at the unofficial rate 5 Iran Investment Monthly Market Overview Performance & Update December 2018 - Volume 13, No 144 Junior Market Trade by Value November Monthly Change Total: 580 million US$ Total: -36% Average: 32 million US$ Average: -22% No. Trading Day: 18 October Total: 910 million US$ Average: 41 million US$ No. Trading Day: 22 US$ Million Junior Market Trade by Volume Monthly Change Total: -42% Average:-28% November Total: 14 billion shares Average: 781 million shares No. Trading Day: 18 October Total: 24 billion shares Average: 1082 million shares No. Trading Day: 22 Shares Million Source: Iran Farabourse Company All figures in US$ are converted from IRR at the unofficial rate 6 Iran Investment Monthly Market Overview Sector Insight December 2018 - Volume 13, No 144 Sector Insight - November 2018 206.9 Oil & Gas Extraction and Related Services Except Surveying 190.0 Metal Ores Mining 170.8 Agriculture 144.5 Wood & By-products 124.0 Coal & Lignite Mining % Sector 24 Motor Vehicles and Auto Pars Performance1 18.2 Publishing Printing & Reproduction of Media 17 Financial leasing 17 Financial Intermediates 16 Tanning and Dressing of Leather 26.5 x Fabricated Metal Products except Machinery & Equipment’s 22.0 x Motor Vehicles and Auto Pars 17.7 x Electric Machinery & Apparatus 15.9 x Monetary Intermediation - Banks 14.7 x Metal Ores Mining 10.0 x Chemical & By Products 9.4 x Insurance & Pension funding Except P/E Compulsory Social Security 8.7 x Basic Metals 8.1 x Pharmaceuticals 6.5 x Financial leasing 36% Motor Vehicles and Auto Pars -1% Metal Ores Mining -5% Computer & related activities -6% Rubber & Plastic Products -7% Electric Machinery & Apparatus -57% Insurance & Pension funding Except Compulsory %Trading Social Security Value2 -57% Cement, Lime & Plaster -58% Refined Petroleum Products & Nuclear Fuel -62% Investment Companies -66% Machinery & Equipment 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$. Unofficial rates are applied. 7 Iran Investment Monthly Market Overview Sector Insight December 2018 - Volume 13, No 144 Sector Insight: Construction & Housing Construction & Housing The construction and housing sector is directly related to more than 120 sub-sectors and businesses, with an over 50% localization rate in terms of industrial space and over 90% localization in material. Historically, especially over the past 30 years, the housing market used to be a safe haven for investment when other sectors were out of favour or in recession. Even today when there are more developed financial markets such as fixed income or equity market, the traditional strategy of many Iranian households is to invest in a residential or commercial property in prime locations of the city. Over the past three decades, the share of the construction and housing sector in the economy has remained between 3% and 9% of nominal GDP. • Construction sector contribution to GDP (2018): 5.1% • Construction sector market share on TSE: 27,351 Billion IRR (0.4% of TSE market) • Construction sector market share on Farabourse: 27,062 Billion IRR (1.2% of IFB market) • Share of the sector in facilities extended by the banking sector: 9% (March 2018 to October 2018) The CBI data on the number of transactions in housing units in Tehran shows that the housing market has reached its peak over the past two years. In October 2018, the average price per square meter increased by 83% compared to the same period last year with a 32% decline in the number of transactions over the same period. The reason behind this decline is that prices in the housing market are adjusting along with other asset classes such as dollar and gold market.
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