July 2021 - Volume 15 No 172

Summary Equity Markets The TEDPIX index increased by 9.4% and the junior Farabourse (IFB) index increased by 2% in IRR terms over the course of June 2021. Based on the unofficial exchange rate, the month- on-month gain in dollar terms was 5% on the Exchange (TEDPIX); however, the Farabourse market lost 2%. This was partly due to the 4% depreciation of the IRR versus the USD over the month.

Debt Markets For the start of the Iranian calendar year 1400 (March 2021) to the end of June, the total issuance on the fixed income market amounted to 1.1 billion US$ based on the unofficial exchange rate. to maturity (YTM) fell to 21% at the end of June.

Economic Review This issue reviews the latest developments in foreign exchange rate market and Iranian Purchasing Manager Index (PMI) in the Iranian economy. 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.

Photo by: Zeeenshop, Tehran, www.zeeen.ir

1 Iran Investment Monthly Table of Contents 3 Market Overview 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 17 Turquoise Group

2 Iran Investment Monthly Market Overview July 2021 Volume 15 No 172

Market Overview

Whilst the strengthening IRR since the start of the year contributed positively towards the index (YTD up by 9.9%), the major impact for the month was due to commodity producers. The petrochemical sector, which is the largest listed sector in terms of weighting on the TSE, rose by approximately 10% in June. This sector has not experienced a monthly rise of this magnitude since March 2021. Diversified holding companies, which mainly own blue-chip commodity producers in their portfolio, also had a great month with their index soaring by 15%.

Monthly performance of TSE sectors in EURO

Shervin Shahriari Chief Inves‌tment Officer

Source: Tehran

We believe that the current boom in the global non-oil commodity markets may well lose steam in the coming months; this is a scenario that would impact the related sectors on the TSE. In the domestic credit market, the ’s (CBI) recent policy to lower interest rates using its open market operation helped to bring about an acceleration in the rise of prices; yields consequently fell by more than 1 percentage point in June. As a result, the effective yields on dated government debt securities fell to 20.9%, the lowest since March 21.

3 Iran Investment Monthly Market Overview July 2021 Volume 15 No 172

Iranian T-Bills YTM in IRR

Jun 2021 0.21

Source:

As a result of strong supervision by the CBI over deposit rates, and its role in providing banks with excess liquidity, we believe that the current falling interest rate environment will persist over the short run. This should provide the domestic equity markets with an additional uplift, given that the average P/E of the market currently stands at a current level of 11x. Any decline in interest rates would impede the government’s ability to borrow and therefore necessitate a restructuring of the government budget in view of the continuing sanctions on oil exports.

Looking ahead, the big event for Iran next month will be the inauguration of the new president on 5th August. The election of a conservative president, Mr. Raisi, is expected to consolidate power in Iran and set the stage for making vital decisions on the foreign policy side. In regard to a potential revival of the nuclear accord, we expect this to be well received by the stock market and result in a near-term risk-on market , especially in the non-commodity sectors.

4 Iran Investment Monthly Market Overview July 2021 Volume 15 No 172

Performance & Updates

11 - Year Average (2008-2021)1 (billion US$) 131 TSE & Farabourse Junior Market P/E 8.0 x TSE Yield (%) 3 10% TSE Market Cap / GDP 64% TSE & Farabourse Total Turnover (billion US$),Average Annual 30 TSE TSE Overall Index Average Annual Growth (US$) 25% TSE

1 Annual data from 2008 to Jun 2021 2 Calculated based on unofficial IRR per US$ exchange rates.

Summary - Jun 2021 Market Capitalization (billion US$) 281 TSE & Farabourse Junior Market Free Float 21% TSE & Farabourse Junior Market Number of Listed Companies1 692 TSE & Farabourse Junior Market TSE Index Performance (US$)2,4 5.2% (MTD) -8.6% (YTD) TSE Total Turnover (million US$)2 4,123 m$ TSE & Farabourse Junior Market (%) 3 5.8% TSE P/E 10.9

1 176 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 - Jun 2021

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

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

Since the beginning of 2021, the market has contracted as the TSE and IFB have recorded year-to-date losses of 11% and 8% in IRR terms respectively. The loss in hard currency terms was 9% on the TSE and 6% on the IFB on a year-to-date basis. In June 2021, the value of TSE equity trade volumes decreased to USD 3,477 million from the USD 7,697 million average over the last twelve months. The total number of shares traded on the TSE decreased by 16% compared to a twelve-month average of 180 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 July 2021 Volume 15 No 172

Historic Trends & Sector Insight

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

Historic Average: 204 Historic Average: 188

Jun 2021 : 391

Jun 2021 :428

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

115

112

111

105

Diversified Industrial (Holdings) Metal Ores Mining Refined Products Overall USD

TSE Large Sectors (% Market Capitalization)

22% 14% 9% 8% 7% 5% 5% 4% 3% 3% 20 Other Metals* Monetary Diversified Chemicals Refined Petroleum Source: TSE, Bonbast, as of Jun 2021 *Metals sector includes steel, copper and aluminum Motor Vehicles And Auto Parts Pharmaceuticals Computer & Related Activities Metal Ores Mining Telecommunications

6 Iran Investment Monthly Refined Petroleum Market Overview July 2021 Volume 15 No 172

Industry at a Glance - Jun 2021

YTD 1-Year Return 5-Year Return Top Performing Companies Market Cap Sector Trailing (%) Trailing (%) Trailing (%) in Jun 2021 (MOM %) (Million USD) in USD in USD in USD

Iranian lead and zinc production and development company1 32 - - - Metals* Iranian Zinc Industrial Expansion Company1 26 - - -

Kashan Amirkabir Steel Company 306 -53% -55% -39%

Damavand Mining Company 149 -51% -77% 131%

Mining Gol Gohar & Mining Industrial Co. 7,154 -9% -27% 33%

Mining and Metals Development Investment Company 3,114 -25% -54% 12%

Tabriz Oil Refining Company 1,291 6% -37% 33%

Petroleum Tehran Oil Refining Company 2,745 -6% -66% -

Sepahan Oil Company 650 -30% -55% -69%

Nouri Petrochemical Company 3,214 25% -63% -

Chemical Kermanshah Petrochemical Industries Company 533 -11% -39% 76%

Jam company 3,111 -7% -24% -34%

Tejarat Bank 2,284 -16% -27% -64%

Banks Saderat Bank 1,504 -23% -38% -68%

EN Bank 550 -12% -36% -71%

1: New IPO

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

344, Jun 2021 306, Jun 2021 209, Jun 2021 166, Jun 2021 137, Jun 2021

Source: TSE, Bonbast, as of ending Jun 2021 *Metals sector includes steel, copper and aluminum

7 Iran Investment Monthly Market Overview July 2021 Volume 15 No 172

Market Snapshot -Jun 2021 Iran & Regional Markets

Iran: A 27-Year Snapshot, Asset Class Annualized Return in US$ (%) P/E Multiple Comparison MSCI Morocco 27.1 Kuwait 37.1 Qatar 18.1 11% MSCI Arabian Markets 22.2 MSCI GCC Countries 22.6 MSCI Egypt 7.8 6% 5% Saudi Arabia 36.2 UAE 22.3 Iran 10.9 % Turquoise Iran Fund 8.8 Sub Fund B/C, as of ending Jun 2021 Note: Annual data from 1995 to Jun 2021 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 18.7 18.2 1 1-Year Performance in $ 1-Year Performance in $ 1-Year Performance in $ -34.1% 41.4% 38.9% Annualized 10 Year in $ 2 Annualized 10 Year in $ Annualized 10 Year in $ 13.8% 4.7% 5.7%

20.0 Chemicals 20.4 Information Technology 36.1 Financials 13.7 Basic Metals 17.8 Financials 12.9 Communication Services 9.2 Investment Companies 17.6 Consumer Discretionary 11.6 Real Estate 7.6 Diversified Industrials 11.3 Communication Services 9.4 Materials 7.3 Metal Ores Mining 8.4 Materials 9.2 Consumer Staples

Sector Breakdown (%) 42.2 Others Sector Breakdown (%) 24.6 Others Sector Breakdown (%) 20.9 Others

1.TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index) performance calculated in US$ for the Period of Jun 2020 to Jun 2021 2.Overall Tehran Stock Exchange Index 10 year annualized performance calculated in US$ 3.MSCI Emerging Markets Index (US$) - Jun 2021 4.MSCI Frontier Markets Index (US$) - Jun 2021 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 July 2021 Volume 15 No 172

TSE & Junior Market Performance Tehran Stock Exchange: TEDPIX*,Jun 2021

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*, Jun 2021

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 July 2021 Volume 15 No 172

Top Ranked Companies - Jun 2021 Turnover Value % Total Turnover (million US$)

Barkat Pharmaceutical Group Is one of the largest pharmaceuticals holding Companies with more than 20 subsidiaries. Company has acquired 14 Barakat 17.8 0.5% percent of the country total pharmaceutical market. As a knowledge- Pharmaceutical based economic complex, the company has focused on health care products. The subsidiaries are operating in the fields of developing Group commercialization of new technologies and drug manufacturing.

In 1972, Sarcheshmeh Copper Mines Joint Stock Co of Kerman was National Iranian established and, later, in 1976, it was renamed to National Iranian 0.4% Copper Industries Co. to cover all copper mines operations Copper Industry Co. 12.1 throughout the country. This company is active in extraction & utilization of copper mines, production of copper concentrates & manufacturing copper products. The Social Security Social Security Investment Company established in 1986, The company has a diversified sector investment Investment 9.6 0.3% portfolio including oil & gas, mining, pharmaceutical, Company energy, cement and banking sectors.

Esfahan Oil Refining Co. has 23% of Iran’s 0.2% Bandar Abbas refining capacity with a nominal capacity of

Top 5 Traded by Value Traded 5 Top 7.0 Oil Refining co 375,000 barrels per day. The company provides petroleum products for Esfahan Petrochemical Co and etc. Founded in 1962, Iran Khodro Industrial Investment Group (also known as IKCO) is the 0.2% leading Iranian vehicle manufacturer. Development Co. 7.0 IKCO produces c.65% of all domestic vehicles, and is the largest automotive manufacturer in the Middle East. Market Cap % Total Market Cap. (million US$) Mobarakeh Steel Esfahan , one of the largest industrial complexes 6.2% in the country, started its operation in 1991 with a nominal capacity of 2.4 Manufacturing 12,357 million tons per annum. The company produces more than 50% of Iran’s steel and operates in seven industrial complexes.

Persian Gulf Persian Gulf International Transportation founded in 1989 as a Petrochemical 5.8% joint private stock in Iran and was listed in 2010 in Tehran Stock 11,559 Exchange. The company operates as a distributor of products and Industry goods across the country.

In 1972, Sarcheshmeh Copper Mines Joint Stock Co National Iranian of Kerman was established and, later, in 1976, it was 4.9% renamed to National Iranian Copper Industries Co. to Copper Industry Co. 9,676 cover all copper mines operations throughout the country. This company is active in extraction & utilization of copper mines, production of copper concentrates & manufacturing copper products. The Social Social Security Investment Company established Security Investment 3.9% in 1986, The company has a diversified sector 7,768 investment portfolio including oil & gas, mining, Company pharmaceutical, energy, cement and banking sectors.

Top 5 by Market Capitalization Top Tamin Petroleum & Tamin Oil, Gas and Petrochemical Petrochemical Investment Company was formed with 2.0% the merger of Tamin Oil and Gas holding Investment Co. 4,052 with Tamin Petrochemical and Chemical Industries holding in 2011.

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 July 2021 Volume 15 No 172

Iran’s Fixed Income Market For the start of the Iranian calendar year 1400 (March 2021) to the end of June, the total issuance on the fixed income market amounted to 1.1 billion US$ based on the unofficial exchange rate. Yield to maturity (YTM) fell to 21% at the end of June.

Iran’s Debt Securities Market - Jun 2021* 1.5 10.8 Tehran Stock Exchange Iran Farabourse (Junior Market)

Market Value (billion US$)* 1.9 226.0 Tehran Stock Exchange Iran Farabourse (Junior Market)

Average Daily Trading Value (million US$)* 467 59,908 Tehran Stock Exchange Iran Farabourse (Junior Market)

Average Daily Trading Volume (bonds)

* As of Tir 1400 (22 May- 21 Jun 2021)

Breakdown of Sukuk Issuance in Iran’s Capital Markets, 2021 (1400)** - (billion US$)

73% 15% 9% 2%

Islamic T-Bills Murabaha Sukuk Other Mortgage-Backed Securities

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 July 2021 Volume 15 No 172

Iran’s Fixed Income Market

Snapshot of the Highest Yielding Debt Securtites1 - Jun (2021)

Issuer Type YTM (p.a.) Maturity

Corporate Ijarah 0.221 4-Mar-24

Corporate Murabaha 0.220 22-Jun-25

Government TreasuryBill 0.220 28-Oct-23

Government TreasuryBill 0.220 28-Aug-23

Corporate Ijarah 0.220 27-Apr-25

Government TreasuryBill 0.219 29-Oct-23

Government TreasuryBill 0.219 8-May-23

Government TreasuryBill 0.218 27-Nov-23

Government TreasuryBill 0.218 30-Jan-23

Government TreasuryBill 0.218 3-Aug-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

Jun 2021 0.21

Source: Tehran Stock Exchange - Iran Farabourse

12 Iran Investment Monthly Economic Review July 2021 Volume 15 No 172

Latest Updates

Exchange Rate

The USD rate against IRR increased by 3% over the past four months. It is worth noting that at the end of June, the gap between the official rate (CBI market rate) and the unofficial rate of the exchange has widened to over 10%.

Unofficial USD Rate

Source:CBI

USD Rate Gap (Unofficial vs. CBI Market Rate)

14%

Source:CBI

13 Iran Investment Monthly Economic Review July 2021 Volume 15 No 172

Purchasing Manager Index (PMI)

Purchasing Manager Indexes (PMI) provide information about current and future manufacturing activities and businesses in the services sector. It is an indicator derived from monthly surveys sent to senior executives of around 400 companies. The PMI is a number from 0 to 100 and is calculated based on the weighted average of five sub-indices. These five sub-indices monitor changes in business unit’s operations in terms of new orders, raw material inventory, production, supplier deliveries and employment. A PMI over 50 represents an expansion and under 50 indicates a contraction; a reading of 50 implies no change in comparison to the previous month.

Between April and June 2021, the components of Iran’s PMI’s, in particular “goods & services sale”, “new orders” and “business activity”, expanded considerably between April and June 2021. The sales of goods and services index increased by 71% (from 31.43 in April to 53.8 in June 2021) and the new orders index increased by 57% (from 31.53 in April to 49.52 in June 2021). This upward trend highlights that the recessionary atmosphere at the start of the Iranian calendar year has changed and the demand side has moved to normal levels. The table below illustrates the trend of the PMI’s components over the past three months.

PMI Components

Index Apr-21 May-21 Jun-21 Jun-Apr Chg. % Goods and Services Sale 31.43 51.15 53.8 71% New Orders 31.53 49.8 49.52 57% Business Activity 36.15 58.64 52.46 45% Overall PMI 39.65 53.84 51.27 29% Delivery Times 46.92 59.23 56.19 20% Goods and Services Export 41.31 44.69 48.4 17% Purchase of Inputs 41.86 49.49 45.73 9% Employment 49.62 52.05 51.5 4%

Source:Tehran Chamber of Commerce

14 Iran Investment Monthly News & Views July 2021 Volume 15 No 172

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

SCI: National Consumer Price Index Real GDP Growth (%) 2.5 2.1 by Expenditure Deciles in the Month of Khordad of the year 1400 Released: July 2021 Inflation (%) 39 27

Source:IMF

Actual Macroeconomic Data Unit Period Value Comments

Population Growth % 2011- 2016 1.24% -

1399 Unemployment Rate % 8.8% - (Spring 2021/ 20)

Inflation Rate % Jun-21 (Y/Y) 44.2% 2016 = 100

1399 Non-oil GDP Growth % 0.0% 2011 = 100 (2020/ 21) 1399 GDP Growth % 0.7% 2011 = 100 (2020/ 21)

Source: Statistical Center of Iran

15 Iran Investment Monthly News & Views July 2021 Volume 15 No 172

Recent Brokerage Report Turquoise News

Iran Daily Market Update – Jul 2021 February 2, 2021 Iran Fara Bourse, the junior equity market, hosted a subscription 19 July 2021 for units of a private equity fund on Monday -- the second of its kind.

18 July 2021 The fund is dubbed as Turquoise Servat Afarin Private Equity Fund and its ticker symbol is displayed on the IFB bulletin board 14 July 2021 as ‘Servat’. It is operated by Turquoise Partners, a leading finan- 13 July 2021 cial service company in Tehran, the IFB news portal reported.

12 July 2021 A PE fund is a pooled investment scheme used for investments in equities. Institutional and retail provide the capital for the private equity, and capital can be utilized to fund new tech- nology, expand working capital and bolster balance sheets of the companies. More Information

October 17, 2020 Ramin Rabii, Turquoise Partners CEO’s interview with The Economist on the recent boom and bust of the Iranian stock market:

“A steadily weaker Rial has over time boosted non-oil export industries, such as petrochemicals, metals, engineering services and even chocolate and pastries”, says Ramin Rabii of Turquoise Partners, a financial-services group.

The Stock market reflects this industrial diversity. There are hundreds of in a variety of sectors. And because crude is a state-owned business, it better reflects the non-oil economy. The market had a good run last year thanks in large part to improving export earnings. People took notice. Here was an asset class that acted as a hedge against the Rial’s diminishing value. The scene was set for this year’s melt-up in share prices.

“The number of people active in the Stock market went from 700,000 to 5m in a matter of months”, says Mr Rabii. More Information

16 Iran Investment Monthly Turquoise Group July 2021 Volume 15 No 172

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 July 2021 Volume 15 No. 172 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 . 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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