April & May 2020 - Volume 14, No 159

Summary Equity Markets The TEDPIX index and junior Farabourse (IFB) market continue to expand 74% and 57% in IRR terms over the past two months ending April 2020, respectively. Based on the unofficial exchange rate, the month-on-month gain in dollar terms accelerate by 61% in TSE and 46% in Farabourse market. This was mainly due to 8% depreciation of IRR exchange rate over the month.

Debt Markets For the start of the Iranian calendar year 1399 (March 2020) to end April, total issuance on the fixed income market reached 0.2 billion US$ based on the unofficial exchange rate. Yield to maturity (YTM) remained stable at 16% at the end of April.

Economic Review This issue reviews the updates on housing market and the recent inflation targeting announcement published by the CBI. 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 centres.

North of Iran Photo: Kourosh Odouli

1 Iran Investment Monthly Table of Contents 3 Market Overview 3 Market Update

6 Performance & Updates

8 Historic Trends & Sector Insight

9 Industry at a Glance

10 Market Snapshot

12 TSE & Junior Market Performance

14 Top Ranked Companies

16 Iran’s Fixed Income Market 19 Economic Review

19 Latest Updates

21 Macroeconomic Data 22 News & Views

22 Recent Brokerage Reports

22 Turquoise News

2 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

Market Update

The Tehran stock exchange (TSE) markedly continued its recent upward trend and grew by 66% in Euro terms in April 2020. Furthermore, the market’s average P/E ratio exceeded 18.2 by the end of month, which is around 183% higher than its historic average. Due to the prevalence of negative sentiment towards parallel investment classes, the stock market was swamped with a continuous inflow of fresh liquidity predominately by retail investors over the course of the past few months.

Meanwhile, stock prices showed continuous growth leaving no room for the expected and appropriate price corrections. Another important factor was the debate surrounding the increase in bank’s interest rates on deposits in late April. This eliminated the possibility of higher free Shervin Shahriari risk rates and encouraged investors to inject new monies into the stock Chief Investment Officer market. A council of Banks announced that the one-year interest rate or deposits would be 15%, substantially lower than the range of 18% to 20% prior to the announcement

The market also experienced unprecedented daily trade volumes, averaging at USD 441 million per day during April. Buyers were particularly enthusiastic about shares of some of the larger companies. The increase of 492 % in trade volumes compared to the same period last year is indicative of investor interest towards the stock market.

Monthly TSE Volumes

8.8

Average : 3.1 Billion USD

Source: TSE

3 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

Among the main contributors to this increase are individual investors, who carried out more than 80% of purchases in the market. In addition, 70% of the number of trades carried out online, indicating the increased presence of individual buyers in the market. This positive atmosphere and increased trade volumes have resulted in large price movements. A clear example of this trend was in trading of smaller companies such as tile makers, automotive and rubber manufacturers. Given the influx of individual investors and the reluctance of larger shareholders to sell, the stocks of these companies experienced a 5-10x increase in value over the past year without any clear fundamental justification. To keep up with the increasing demand, major shareholders started to offer their shares heavily at market value, yet, they did not succeed to respond to the buyers’ demand. To temporarily balance against the share price increases and the heavy influx of liquidity, the stock exchange officials have been trying to encourage the government and semi-governmental entities to increase their offerings of shares to the market.

Historic P/E 2007 – 2020

20 April-20 18.2 18

16

14

12

10

8

6

4

2 P/E 0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Source: TSE

The average P/E of the market reached the vicinity of 18.2 by the end of April. We have not experienced such valuation in the history of the TSE.

4 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

The last highest average P/E was observed in 2004, which reached a high of 10.8x when the economy was robust with the growth rate of around 6% and inflation below 15%, none of them exist now. In our view, there is the risk to the downside for the P/Es to fall towards their previous means, if the current increase in share prices does not translate into profit for companies. With the banks’ annual deposit interest of 15%, the 9.5 percentage point gap between yields and the average cash returns of the market must be compensated for through increasing future profits. YTM vs. Bank Deposit Rate

April-20 16.2% April-20 15%

Source: CBI, IFB

With the Warren Buffet ratio of market cap to GDP around 161%, we think we are overdue for a correction and will probably get a severe one in the months to come.

5 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

Performance & Updates

11 - Year Average (2008-2020)1 Market Capitalization (billion US$) 2 113 TSE & Farabourse Junior Market P/E 7.0 x TSE Dividend Yield (%) 11 % TSE Market Cap / GDP 39 % TSE & Farabourse Dividend Growth Rate 22 % TSE Total Turnover (million US$), Average Annual 15 TSE TSE Overall Index Average Annual Growth (US$) 20 % TSE

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

Summary - March 2020 Market Capitalization (billion US$) 165 TSE & Farabourse Junior Market Free Float 22% TSE & Farabourse Junior Market Number of Listed Companies1 629 TSE & Farabourse Junior Market

TSE Index Performance (US$)2,4 -4.4% (MTD) 13.8% (YTD) TSE Total Turnover (million US$)2 6,688 TSE & Farabourse Junior Market Dividend Yield (%) 3 7.1% TSE P/E 10.9 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 - March 2020

Iran Farabourse (Junior Market) Trade Volume (million US$) Since the beginning 2020, the market has expanded to the Tehran Stock Exchange (Main Market)Trade Volume (million US$) upside recording the YTD performance of the TSE and IFB to 42% in IRR terms respectively. The gain in hard currency terms was 14% on the TSE and the IFB on a year to date basis. In March 2020, the TSE equity trade value expanded to 5,293 million US$ from the 3,024 million US$ historic 12-month average. The total number of shares traded on the TSE expanded by 19% compared to the one-year historic average of 94 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.

6 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

Performance & Updates

11 - Year Average (2008-2020)1 Market Capitalization (billion US$) 2 120 TSE & Farabourse Junior Market P/E 7.8 x TSE Dividend Yield (%) 11 % TSE Market Cap / GDP 44 % TSE & Farabourse Dividend Growth Rate 22 % TSE Total Turnover (billion US$), Average Annual 15 TSE TSE Overall Index Average Annual Growth (US$) 34 % TSE

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

Summary - April 2020 Market Capitalization (billion US$) 267 TSE & Farabourse Junior Market Free Float 22% TSE & Farabourse Junior Market Number of Listed Companies1 632 TSE & Farabourse Junior Market

TSE Index Performance (US$)2,4 68.6% (MTD) 91.9% (YTD) TSE Total Turnover (million US$)2 11,859 TSE & Farabourse Junior Market Dividend Yield (%) 3 4.4% TSE P/E 18.2 x

1 173 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 - April 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 134% and 108% in IRR terms respectively. The gain in hard currency terms is 92% on the TSE and 71% on the IFB on a year to date basis. In April 2020, the TSE equity trade value expanded to 8,827 million US$ from the 3,664 million US$ historic 12-month average. The total number of shares traded on the TSE expanded by 37% compared to the one-year historic average of 101 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.

7 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

Historic Trends & Sector Insight

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

Historic Average: 165 Historic Average: 159 April 2020 : 340

April 2020: 489

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

Diversified Industrial (Holdings) Post & Telecommunication 200 Monetary Intermediation - Banks Overall USD 182 176

163

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 April 2020 *Metals sector includes steel, copper and aluminum

8 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

Industry at a Glance - April 2020

YTD Return 1-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

Sadid Industrial Group 871 533% 50% -77% Metals* MIDCO 3,008 92% 153% -42%

Yuka Foolad Holding 273 125% 515% -

Iran Zinc Mines Development 413 218% 426% 270%

Mining Sadr Tamin Investment Co. 1,465 162% 364% -

Chadormalu Mining and Industrial Company 4,976 25% 138% -22%

Behran Oil 928 89% 186% -13%

Petroleum Sepahan Oil Company 757 56% -46% -56%

Oil Industry Investment Company 137 48% 194% 7%

Padideh Shimi Gharn* 361 - - -

Chemical Shahid Tondgooyan Petrochemical Company* 1,598 - - -

Persian Gulf Petrochemical Industries Co. 12,724 50% 188% -69%

Saman Bank 668 -71% -35% -33%

Banks Parsian Bank 1,861 -37% 7% -24%

Pasargad Bank 2,663 214% 443% 378%

* Recent IPO

TSE Large Sectors 5-Year Performance (Normalized in USD) Metals Mining 309, April 2020 Petroleum Chemical Banks 251, April 2020

210, April 2020

157, April 2020

135, April 2020

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

9 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

Market Snapshot -March 2020 Iran & Regional Markets

Iran: A 25-Year Snapshot, Asset Class Annualized Return in US$ (%) P/E Multiple Comparison 10% MSCI Morocco 16.9 Kuwait 12.8 Qatar 11.5 6% MSCI Arabian Markets 12.6 5% MSCI GCC Countries 12.8 MSCI Egypt 7.0 1% Saudi Arabia 15.1 UAE 6.9

% Iran 10.9 Turquoise Iran Fund* 12.3 Sub Fund B/C, as of ending March 2020 Note: Annual data from 1995 to March 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 10.9 12.5 10.0 1 1-Year Performance in $ 1-Year Performance in $ 1-Year Performance in $ 137.3% -17.4% -18.7% Annualized 10 Year in $ 2 Annualized 10 Year in $ Annualized 10 Year in $ 9.8% 1.0% 1.4%

22.4 Chemicals 21.6 Financials 52.4 Financials 13.7 Basic Metals 16.9 Information Technology 14.7 Communication Services 8.9 Refined Petroleum 15.4 Consumer Discretionary 9.9 Real Estate 7.6 Metal Ores Mining 13.1 Communication Services 7.1 Consumer Staples 7.3 Monetary intermediation 6.7 Materials 4.2 Materials

Sector Breakdown (%) 40.1 Others Sector Breakdown (%) 26.41 Others Sector Breakdown (%) 11.7 Others

1.TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index) performance calculated in US$ for the Period of March 2019 to March 2020 2.TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index)10 year annualized performance calculated in US$ 3.MSCI Emerging Markets Index (US$) - March 2020 4.MSCI Frontier Markets Index (US$) - March 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.

10 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

Market Snapshot -April 2020 Iran & Regional Markets

Iran: A 25-Year Snapshot, Asset Class Annualized Return in US$ (%) P/E Multiple Comparison 13% MSCI Morocco 16.9 Kuwait 13.3 Qatar 12.9 5% MSCI Arabian Markets 12.6 5% MSCI GCC Countries 13.7 MSCI Egypt 7.5 1% Saudi Arabia 28.6 UAE 8.0

% Iran 18.2 Turquoise Iran Fund* 18.6 Sub Fund B/C, as of ending April 2020 Note: Annual data from 1995 to April 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 18.2 13.3 10.6 1 1-Year Performance in $ 1-Year Performance in $ 1-Year Performance in $ 264.1% -11.7% -13.4% Annualized 10 Year in $ 2 Annualized 10 Year in $ Annualized 10 Year in $ 10.0% 1.8% 2.1%

22.4 Chemicals 20.9 Financials 50.9 Financials 13.7 Basic Metals 17.0 Information Technology 17.7 Communication Services 8.9 Refined Petroleum 15.3 Consumer Discretionary 10.7 Real Estate 7.6 Metal Ores Mining 1.3 Communication Services 7.5 Consumer Staples 7.3 Monetary intermediation 7.0 Materials 4.4 Industrials

Sector Breakdown (%) 40.1 Others Sector Breakdown (%) 38.47 Others Sector Breakdown (%) 8.9 Others

1.TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index) performance calculated in US$ for the Period of April 2019 to April 2020 2.TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index)10 year annualized performance calculated in US$ 3.MSCI Emerging Markets Index (US$) - April 2020 4.MSCI Frontier Markets Index (US$) - April 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.

11 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

TSE & Junior Market Performance Tehran Stock Exchange: TEDPIX*, March 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*,March 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.

12 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

TSE & Junior Market Performance Tehran Stock Exchange: TEDPIX*, April 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*,April 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.

13 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

Top Ranked Companies - March 2020 Turnover Value % Total Turnover (million US$) Tamin Oil, Gas and Petrochemical Investment Company was Tamin Petroleum formed with the merger of Tamin Oil and Gas holding with Tamin & Petrochemical 24.1 0.5% Petrochemical and Chemical Industries holding in 2011. The Investment Co. company is invested in 19 listed companies and 19 non-listed companies in the oil products, petrochemical, chemical and rubber industries. Esfahan Oil Refining Co. has 23% of Iran’s refining capacity with Isfahan Oil a nominal capacity of 375,000 barrels per day. The company 0.2% provides petroleum products for Esfahan Petrochemical Co., Refinery 7.8 Arak Petrochemical Co., Sepahan Oil Co., Jey Oil Co. and National Petrochemical Co. of Iran. Esfahan Oil Refining Co. started gasoline production as of 2013. Sadr Tamin Investment Founded in 1999 as the first holding company in 6.4 0.1% Ceramic and Mineral products in the country. Co.

Founded in 1966 as the branch office Iran Darou of CYANAMID KBC an American Pharmaceutical Co. 0.1%

Top 5 Traded by Value Traded 5 Top pharmaceutical company, the company 6.0 was listed in stock market in 2001. Currently the company produce more than 95 different types of medicines. Iran Chemical Iran Chemical Industries Investment Industries 0.1% Co. (ICIIC) established in 1988 Investment Co. 5.9 in Isfahan. The company manufactures variety of chemical products in the country. Market Cap % Total Market Cap. (million US$)

Iran Khodro 17.3% Founded in 1962, Iran Khodro Industrial Group (also known as IKCO) is the 20,802 leading Iranian vehicle manufacturer. IKCO produces c.65% of all domestic vehicles, and is the largest automotive manufacturer in the Middle East.

Persian Gulf PGPIC was established in the first phase of the privatization of Iran’s Petrochemical petrochemical sector when the National Petrochemical Company 5.9% (NPC) transferred its shares in a number of petrochemical Industry 7,079 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. Mobarakeh Steel Esfahan Mobarakeh Steel Company, one of the largest Manufacturing 4.8% industrial complexes in the country, started its operation in 5,788 1991 with a nominal capacity of 2.4 million tons per annum. The company produces more than 50% of Iran’s steel and operates in seven industrial complexes. Golgohar Mining Founded in 1991, Golgohar Mining & Industrial Company is one of the largest iron ore and iron and Industrial 3.6% pellet producers in Iran. The company operates Company 4,353 in combined plants among six iron mine zones about 55 km southwest of Sirjan city near Kerman province. Top 5 by Market Capitalization Top In 1972, Sarcheshmeh Copper Mines Joint National Iranian Stock Co of Kerman was established and, Copper Ind. Co. 3.6% later, in 1976, it was renamed to National 4,339 Iranian Copper Industries Co. to cover all copper mines operations throughout the country.

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

14 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

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

Established in 1991, the company is active in investment, Ghadir Investment 0.2% management and restructuring of companies and currently 15.0 has 130 subsidiary companies under the management. The Company company was listed in TSE in 1995.

Founded in 1985, Azarab Industries Company is the leading AzarAb Industries Iranian industrial contractor in the area of construction, 14.0 0.1% development and procurement of power plants, oil, gas, petrochemical and steel industries. The company has also undertaken projects in oil refineries constructions.

PGPIC was established in the first phase of the privatization Persian Gulf of Iran’s petrochemical sector when the National Petrochemical Petrochemical Company (NPC) transferred its shares 12.6 0.1% in a number of petrochemical companies to PGPIC, Industry 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. Iranian Investment Founded in 2011, Iranian Investment Petrochemical 0.1% Petrochemical Group Company (IIPGC) Top 5 Traded by Value Traded 5 Top Group Company 10.5 is an investment holding company specialized in the petrochemical sector.

Mapna Group is the largest and MAPNA Group 0.1% most well-known Iranian enterprise 10.4 operating in the construction and development of thermal power plants. Market Cap % Total Market Cap. (million US$) Persian Gulf PGPIC was established in the first phase of the privatization of Iran’s 7.2% petrochemical sector when the National Petrochemical Company (NPC) Petrochemical 15,612 transferred its shares in a number of petrochemical companies to PGPIC, Industry 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.

Mobarakeh Steel Esfahan Mobarakeh Steel Company, one of the largest industrial complexes in the country, started its operation in 1991 with a nominal Manufacturing 11,985 5.5% 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 3.8% to National Iranian Copper Industries Co. to cover all copper Copper Ind. Co. 8,217 mines operations throughout the country. This company is active in extraction & utilization of copper mines, production of copper concentrates & manufacturing copper products.

Established in 1986, the company is the The Social investment arm of Social Security Insurance Security Investment 2.9% Holding. The company has a diversified sector 6,374 investment portfolio including oil & gas, mining, Company pharmaceutical, energy, cement and banking sectors.

Top 5 by Market Capitalization Top Chadormalu Chadormalu Mining and Industrial Company Mining & Industrial 2.4% is the largest iron ore producer in the country with more than 34% share of Iran’s Co. 5,180 total production.

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

15 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

Iran’s Fixed Income Market For the Iranian calendar year 1398 (March 2019 to end March 2020), total issuance on the fixed income market reached 6 billion US$ based on the unofficial exchange rate. Yield to maturity (YTM) remained at 18.8% at the end of March 2020.

Iran’s Debt Securities Market - March 2020* 0.75 6.6 Tehran Stock Exchange Iran Farabourse (Junior Market)

Market Value (billion US$)* 6.62 59.35 Tehran Stock Exchange Iran Farabourse (Junior Market)

Average Daily Trading Value (million US$)*

1,105,200 10,989,450 Tehran Stock Exchange Iran Farabourse (Junior Market)

Average Daily Trading Volume (bonds)

* As of Esfand 1398 (20 Feb 2020 - 19 March 2020)

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

47% 24% 6% 8% 11% 3%

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

16 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

Iran’s Fixed Income Market For the start of the Iranian calendar year (March 2020) to end April, total issuance on the fixed income market reached 0.28 billion US$ based on the unofficial exchange rate. Yield to maturity (YTM) declined to 16% at the end of April.

Iran’s Debt Securities Market -April 2020* 0.67 6.3 Tehran Stock Exchange Iran Farabourse (Junior Market)

Market Value (billion US$)* 1.65 15.06 Tehran Stock Exchange Iran Farabourse (Junior Market)

Average Daily Trading Value (million US$)*

272,000 3,170,600 Tehran Stock Exchange Iran Farabourse (Junior Market)

Average Daily Trading Volume (bonds)

* As of Farvardin 1399 (20 March 2020 - 20 April 2020)

Value & Breakdown of Sukuk Issuance in Iran’s Capital Markets, 2020 (1399)** - (billion US$)

100% Islamic T-Bills

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

17 Iran Investment Monthly Market Overview April & May 2020 - Volume 14, No 159

Iran’s Fixed Income Market

Snapshot of the Highest Yielding Debt Securtites1 - March & April 2020

Issuer Type YTM (p.a.) Maturity

Government Ijara 0.190 14-Aug-21

Government Ijara 0.190 14-Aug-21

Government Ijara 0.190 14-Aug-21

Corporate Ijara 0.190 14-Aug-21

Government Manfeat 0.190 6-Aug-23

Government TreasuryBill 0.190 2-Feb-22

Government TreasuryBill 0.190 2-Feb-22

Government TreasuryBill 0.190 2-Feb-22

Corporate TreasuryBill 0.190 2-Feb-22

Government TreasuryBill 0.190 2-Feb-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

April 2020 0.16%

Source: Tehran Stock Exchange - Iran Farabourse

18 Iran Investment Monthly Economic Review April & May 2020 - Volume 14, No 159

Latest Updates Housing Market

March 2020 : In the Tehran housing market, the highest average transaction value was found in District 1 (north Tehran) at 313.2 million IRR per square meter (1,997 US$ at a rate of 156,800 IRR/US$), and the lowest was in District 18 at 74.1 million IRR per square meter (473 US$) per square meter. In IRR terms, the highest and lowest average transaction value increased by 29% and 52% compared to the same period last year, respectively. Transactions between 574 US$ and 670 US$ per square meter were the most common, accounting for 9.7% of total transactions. The average rent for residential units in Tehran city increased 29% over the 12-month period. According to the CBI, rent is one of the main costs for households, accounting for 33% of total household spending.

• In March 2020, the first month of Iranian Calendar Year (Farvardin 1399) some 1,200 residential units were sold in Tehran, down 64% from the same month last year. • Highest allocation in the number of transactions were registered in districts 5, 2 and 4, with share of 16%, 9% and 8%, respectively.

April 2020 : In the Tehran housing market, the highest average transaction value was found in District 1 (north Tehran) at 339 million IRR per square meter (2,084 US$ at a rate of 162,700 IRR/US$), and the lowest was in District 18 at 87 million IRR per square meter (538 US$) per square meter. In IRR terms, the highest and lowest average transaction value increased by 30% and 33% compared to the same period last year, respectively. Transactions between 738 US$ and 830 US$ per square meter were the most common, accounting for 9% of total transactions. The average rent for residential units in Tehran city increased 29% over the 12-month period. According to the CBI, rent is one of the main costs for households, accounting for 32% of total household spending.

• In April 2020, the second month of Iranian Calendar Year Ordibehesht 1399) some 11,310 residential units were sold in Tehran, down 7% from the same month last year. • The average selling price per square meter in the residential sector inclined by 11% in US$ term, compared to the same period last year. • Highest allocation in the number of transactions were registered in districts 5, 2 and 4, with share of 16%, 9% and 8%, respectively.

Annual Chg. Housing Market Development Apr-19 Mar-20 Apr-20 (% April 2020 Vs. April 2019)

Number of Transactions (units) 12,128 1,243 11,310 -6.7%

Average Price Per Square Meter (Million IRR) 127 153 170 33.9%

IRR Per US$ 134,500 166,200 162,700 21.0%

Average Price Per Square Meter (US$) 942 920 1,043 10.7%

Source: CBI

19 Iran Investment Monthly Economic Review April & May 2020 - Volume 14, No 159

Inflation Targeting

Inflation Targeting is a monetary policy framework to provide a nominal anchor to the economy. The aim is to assist policymakers to tie down other nominal variables and overall price levels. In the past, central banks used a currency peg anchor that linked the value of the domestic currency to the value of the currency of a low-inflation country. This approach had its own cons such as exposing the economy to the external shocks coming from countries with lower inflation. Instead of using a pegged currency, many central banks began to target the money supply growth and inflation over time. Inflation targeting is straightforward in theory. First, the government estimates which rate is the appropriate rate for the economy. Second, the central bank forecasts the future path of inflation and compares it with the targeted rate. Third the difference between the forecast and the target rate determines to what extend the monetary policy should be adjusted. The main advantage of inflation targeting is to combine the elements of “rules” and “discretion” in monetary policy. Rather than focusing on achieving the target at all times, the approach emphasizes achieving the target over the medium term—typically over a two to three-year horizon. This allows policy to address other objectives—such as smoothing output—over the short term. Thus, inflation targeting provides a rule-like framework within which the central bank has the discretion to react to shocks. Because of inflation targeting’s medium-term focus, policymakers need not feel compelled to do whatever it takes to meet targets on a period-by-period basis.

In mid May 2020, the Central Bank of Iran (CBI) set a 22% inflation target and identified an upper or lower limit of 2 percentage points for the current fiscal year that ends in March 2021. According to the CBI governor, the bank will use multiple policy instruments to implement “inflation targeting”.

20 Iran Investment Monthly Economic Review April & May 2020 - Volume 14, No 159

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 Farvardin of the Year 1399 Released: 09 May 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 Farvardin of the year 1399 Released: 03 May 2020 Government Net Lending Borrowing (% GDP) -5.0% -5.6% -6.1% SCI: Consumer Price Index in the Month of Farvardin of the Year 1399 Current Account Balance (% GDP) -3.4% -3.4% -3.3% Released: 25 April 2020

SCI: Consumer Price Index in the Month of Esfand of the Year 1398 Released: 08 April 2020 Actual Macroeconomic Data Unit Period Value Comments

Population Growth % 2011- 2016 1.24% -

1398 Unemployment Rate % 10.70% - (Mar 19 - Mar 20)

Inflation Rate % Apr-20 (Y/Y) 29.8% 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

21 Iran Investment Monthly News & Views April & May 2020 - Volume 14, No 159

Recent Brokerage Report Turquoise News

Iran Daily Market Update – May 2020 February 9, 2020 The Turquoise Venture Capital Fund started its public May 6, 2020 market subscription on the Iran Farabourse exchange from Feb 9th, 2020 for a period of 7 days. The Fund however was May 5, 2020 oversubscribed on the 3rd day and was able to raise money from a solid mix of both institutional and private investors. This May 4, 2020 public market subscription set a record within the Iranian capital May 3, 2020 markets for the venture capital funds, which was a positive news for the Iranian start-up ecosystem. May 2, 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

22 Iran Investment Monthly News & Views April & May 2020 - Volume 14, No 159

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

23 Iran Investment Monthly April & May 2020 - Volume 14, No 159 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]

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24 Iran Investment Monthly