September 2018 - Volume 12, No 141
September 2018: President Rouhani & IMF Managing Director, Christine Largarde, in discussions regarding the safeguarding of the JCPOA.
Summary
Equity Markets The Tehran Stock Exchange (TEDPIX Index) rose 13% in IRR terms in August. Market gains reflect the sharp devaluation of the rial since early 2018.
Debt Markets From the start of the Iranian calendar year (March 2018) to end-August, total issuance on the fixed income market reached 761 million US$ based on the unofficial exchange rate*. Yield to maturity (YTM) remained stable at 28% at the end of August.
Economic Review This issue reviews recent developments in Iran’s foreign exchange market and analyzes other markets’ performance in the context of the IRR devaluation. 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.
*IRR per US$: 104,990
1 Iran Investment Monthly Table of Contents 3 Market Overview 3 Market Insight
5 Performance & Updates
8 Sector Insight
12 Company Overview
12 Market Snapshot
13 TSE & Junior Market Performance
14 Top Ranked Companies
15 TSE Statistics
15 FX Movements
16 Iran’s Fixed Income Market 17 Economic Review
17 Latest Updates
20 Macroeconomic Data 21 Turquoise Partners
21 About Turquoise Partners
26 News & Views
2 Iran Investment Monthly Market Overview Market Insight September 2018 - Volume 12, No 141
Portfolio Manager Comments
The Tehran Stock Exchange (TSE) continued its positive momentum in August, with its second best performing month in 2018 in local currency terms, as the overall index rose by 13.5%.
It is important to note, that the TSE has gained 40% in local currency terms YTD but has fallen by 22.3% in EUR YTD, which demonstrates that the market has not yet compensated for the additional ~40-50% drop in the IRR versus the EUR.
The petroleum products and basic metals sectors led the gains by recording rises 19% and 17% in IRR terms in their respective sub-indices, a record on a monthly basis.
Shervin Shahriari In terms of the currency situation, we anticipate that the fall in IRR has mostly Chief Investment Officer run its course in the near term.
Fundamentals suggest that assuming that oil exports remain above 1.5 million barrels per day (i.e. 500,000 barrels per day below the current level), the IRR will remain at this level for the time being.
With this possible stabilization of the currency in the short term, the equity market remains very attractive with significant growth potential, and we believe has the best opportunity to compensate for this weakened Rial.
Below you can see the overall index of the TSE market cap in US$ terms, which illustrates the fall in value of the equity market during this period of devaluation. Given the out performance of the equity market after the last severe devaluation in 2012-13, we are confident that at these currency levels a large part of the market is very attractively priced and we expect the market to re-adjust. Total Iranian Market Cap ( Billion $)
Dec 2013 Market Cap (billion $) 175 Historical Average
Sept 2012 Aug 2018 54 54
Source: Tehran Stock Exchange
3 Iran Investment Monthly Market Overview Market Insight September 2018 - Volume 12, No 141
We would expect the market to bounce back to the US$ 100 billion market capitalization value seen after the signing of the nuclear agreement in late 2015 , which would suggest we would have an 80% rally in the stock prices in IRR terms, which we believe is attainable in mid-term.
4 Iran Investment Monthly Market Overview Performance & Update September 2018 - Volume 12, No 141
Performance & Updates
Summary - Aug 2018 Market Capitalization (billion US$) 64 TSE & Farabourse Junior Market Free Float 21% TSE & Farabourse Junior Market Number of Listed Companies1 588 TSE & Farabourse Junior Market TSE Index Performance (US$)2,4 +10.5% (MTD) -44.0% (YTD) TSE Total Turnover (million US$)2 2,264 m$ TSE & Farabourse Junior Market Dividend Yield (%) 3 10.2% TSE P/E 7.8
1 167 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 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 gained 13% and 12% respectively in IRR terms over the month. Based on the unofficial exchange rate, the month-on-month gains in dollar terms amounted to 11% on the TSE and 9% on the Farabourse.
The TSE’s total trading volume surged by 59% reaching to 1.3 billion US$ in August based on the unofficial exchange rate. Trading on the IFB surged to 917 million US$, 34% increase on a monthly basis based on the unofficial rates. The total number of shares traded on the two markets increased 69% and 65%, respectively.
Tehran Stock Exchange & Junior Market Trade by Value1 - August 2018
Iran Farabourse (Junior Market) Trade Volume (million US$)
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.
5 Iran Investment Monthly Market Overview Performance & Update September 2018 - Volume 12, No 141
Tehran Stock Exchange Trade by Value
Monthly Change Total: 59% Average: 71% August Total: 1,347 million US$ Average: 67 million US$ No. Trading Day: 20
July Total: 849 million US$ Average: 39 million US$ No. Trading Day: 22 US$ Million
Tehran Stock Exchange Trade by Volume
Monthly Change Total: 69% Average: 87% August Total: 50,085 million shares Average: 2,504 million shares No. Trading Day: 20
July Total: 29,469 million shares Average: 1,339 million shares No. Trading Day: 22 Shares
Million
Source: Tehran Stock Exchange All figures in US$ are converted from IRR at the unofficial rate
6 Iran Investment Monthly Market Overview Performance & Update September 2018 - Volume 12, No 141
Junior Market Trade by Value
August Monthly Change Total: 917 million US$ Total: 34% Average: 46 million US$ Average: 48% No. Trading Day: 20
July Total: 681 million US$ Average: 31 million US$ No. Trading Day: 22 US$ Million
Junior Market Trade by Volume
Monthly Change Total: 65% Average:81% August Total: 14.5 billion shares Average: 730 million shares No. Trading Day: 20
July Total: 8.8 billion shares Average: 403 million shares No. Trading Day: 22 Shares
Million
Source: Iran Farabourse Company All figures in US$ are converted from IRR at the unofficial rate
7 Iran Investment Monthly Market Overview Sector Insight September 2018 - Volume 12, No 141
Sector Insight - August 2018
155.2 Oil & Gas Extraction and Related Services Except Surveying 89.9 Metal Ores Mining 84.9 Chemical & By Products 83.8 Basic Metals 57.7 Utilities Supplying
% Sector -1.6 Pharmaceuticals Performance1 -2.4 Motor Vehicles and Auto Pars -2.4 Radio TV & Communication Equipment -4.0 Agriculture -8.9 Transportation & Storage
18.2 x Motor Vehicles and Auto Pars 11.9 x Electric Machinery & Apparatus 11.0 x Food Products and Beverages 10.9 x Monetary Intermediation - Banks 9.7 x Cement, Lime & Plaster
8.0 x Rubber & Plastic Products 7.4 x Other non metallic Mineral Products P/E 7.1 x Insurance & Pension funding Except Compulsory Social Security 5.9 x Financial leasing 5.6 x Pharmaceuticals
19% Refined Petroleum Products -4% Insurance & Pension funding Except Compulsory Social Security -6% Cement, Lime & Plaster -12% Investment Companies -22% Basic Metals
-68% Rubber & Plastic Products %Trading -69% Monetary Intermediation - Banks Value2 -76% Computer & related activities -86% Metal Ores Mining -88% Electric Machinery & Apparatus
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$. Official rate in July and unofficial rate inAugust are applied.
8 Iran Investment Monthly Market Overview Sector Insight September 2018 - Volume 12, No 141
Sector Insight: Technical and Engineering Services
Overview Iran has one of the highest numbers of engineering graduates in the world. According to labour force statistics, in the six years to March 2017, for every engineering technician there were 1.7 engineers in the country. Technical and Engineering Services is considered as one of the new sectors with few listed companies, including those active in contracting, construction consulting, technical inspection and power generation.
Technical & Engineering Services Market Cap (m$) 2,092* Market Cap (% total) 1.7% Number of Listed Companies 2 P/E 10.1x
* At official exchange rate of 42,000.
Table 1. Technical and Engineering Service Statistics
Iranian Calendar Esfand 96 Mordad 96 Mordad 97 Georgian Calendar March 2018 August 2017 August 2018
Sector Index 665 693 771
Market Cap 68,919 73,454 77,614 Billion IRR
Trade Volume 292 46 1495 Billion IRR
Trade Volume 39 6 443 Million Shares
Source: TSE
In 2016 exports of technical and engineering services totaled 2.5 billion US$, heavily weighted to the power sector. Exports of technical and engineering goods reached 500 million US$ in the same period. One of the companies listed in this sector is a large power company. We will briefly review its financial statements in the following pages.
9 Iran Investment Monthly Market Overview Sector Insight September 2018 - Volume 12, No 141
Top TSE Sector Market Capitalization (%) - August 2018
3% Computer & Related Activities 9% Metal Ores Mining 17% 6% Basic Metals Monetary Intermediation
3% 17% 9% 6% 27% 6% 19% 9% 6%
9% Refined Petroleum 6% 27% Telecommunications Chemicals 6% 19% Diversified Industrials Other
TSE & Technical and Engineering Services
Technical and Engineering Services TSE Overall Index Normalised in US$
Source: TSE Calculated based on unofficial IRR per US$ exchange rates from April18.
10 Iran Investment Monthly Market Overview Company Overview September 2018 - Volume 12, No 141
Company Overview MAPNA Group Activity : Technical and Engineering Services
Price 4,351 Date: 29 Aug 2017-29 Aug 2018 1 52wk range (Cents) 4351-6716 Unofficial US$-IRR 109,600 Ticker MAPN1 Industry Technical and Engineering Services Market TSE Source: Tehran Stock Exchange, 1 This exchange rate has been used in this table to convert figures from IRR to US$. It should be noted that this exchange rate is subject to fluctuation
( as of 31 September 18) Performance Stock Data Market cap billion US$ 0.79 TSE Overall Index & Mapna Shares outstanding million 20,000 Free float 9% Financial year end 20-Mar Ave daily value traded ($) 215,000
Ave daily volume traded million shares 5.2 P/E 2.3
Key Data Mapna March March March Overall Index (Million US$) 2017 2016 2015
Normalised Index in US$ Revenue 1,174 1,550 1,804 Normalised Index, adjusted for dividends and share capital increases Net Profit 316 461 433
EPS (Cents) 3.0 4.5 4.7 Dividend 3% 2% 3% Highlights
Exchange Rate • The only and largest engineering group in the country focused on power March March March plant production and electrical services listed on the TSE. 2017 2016 2015 IRR 62,200 47,730 37300 • It has finished more than EUR 30 billion worth of projects. Key Ratios • It is active in building refineries, petrochemical plants and rail 2017 A 2016 A 2015 A transportation equipment. P/B 0.43 0.4 1.1 P/Sales 1.5 2.4 2.9
ROA 5.8 7.8 6.1
ROE 15% 22% 19% Source of data: Company Financial Reports Company Information
MAPNA Group is the largest and most well-known Iranian enterprise which operates in the area Major Shareholders of construction and development of thermal power plants under EPC scheme and independent power plants. The company has also undertaken projects in renewable electricity production such Provincial Investment Company (Justice Shares) 14.5% as wind and it expanding its activity in this field. Mapna’s Employees Investment Company 10.9% Address: No. 231, Mirdamad Blvd., Tehran, Iran Tel: +98 (21) 8198 1001 Fax : +98 (31) 372 52 240 Email: www.mapnagroup.com Source: Firouzeh Asia Brokerage, Turquoise Partners 11 Iran Investment Monthly Market Overview Market Snapshot September 2018 - Volume 12, No 141
Market Snapshot - August 2018 Iran & Regional Markets
Iran: A 20 Year Snapshot, Asset Class Returns in US$ P/E Multiple Comparison Gold MSCI Morocco 18.5 Stock Market Kuwait 15.4 Housing Market Qatar 13.8 MSCI Arabian Markets 14.0 20 Yrs. Annualized Return in US$ MSCI GCC Countries 14.1 Stock Market*: 15% MSCI Egypt 11.3 Housing Market: 5% Saudi Arabia 15.3 Gold Market: 8% UAE 10.1 Iran 7.8 Normalised in US$ (%) Turquoise Iran Fund 7.9 Sub Fund B/C, as of ending August 2018 TEDPIX Tehran Exchange Dividend Price Index Note: Calculated by the unofficial exchange rate
Iran & International Markets
3 4 Tehran Stock Exchange MSCI Emerging Markets MSCI Frontier Markets
Average P/E Average P/E Average P/E 7.8 x 13.8 x 14.4 x 1 1-Year Performance in $ 1-Year Performance in $ 1-Year Performance in $ -42.0% -0.6% -5.5% Annualized 10 Year in $ 2 Annualized 10 Year in $ Annualized 10 Year in $ 4.4% 3.4% -1.2%
26.3 Chemicals 27.6 Information Technology 43.5 Financials 17.4 Basic Metals 23.0 Financials 13.0 Telecommunication 9.1 Refined Petroleum 9.3 Consumer Discretionary 9.8 Consumer Staples 8.5 Metal Ores Mining 7.8 Materials 9.3 Real Estate 5.9 Diversified Industrials (Holdings) 7.7 Energy 5.8 Energy
Sector Breakdown (%) 32.8 Others Sector Breakdown (%) 24.6 Others Sector Breakdown (%) 18.6 Others
1.TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index) performance calculated in US$ for the Period of August 2017 to August 2018 2.TEDPIX Tehran Exchange Dividend Price Index (Dividend & Price Index)10 year annualized performance calculated in US$ 3.MSCI Emerging Markets Index (US$) - August 2018 4.MSCI Frontier Markets Index (US$) - August 2018 Source: Tehran Stock Exchange - Central Bank of Iran - MSCI Inc., Kamcoonline. All figures in US$ are converted from IRR at unofficial rate, unless otherwise indicated. 12 Iran Investment Monthly Market Overview TSE & Junior Market Performance September 2018 - Volume 12, No 141
TSE & Junior Market Performance Tehran Stock Exchange: TEDPIX*, August 2018
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 unofficial rate, unless otherwise indicated.
Iran Farabourse (Junior Market): IFX*, August 2018
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 unofficial rate, unless otherwise indicated.
13 Iran Investment Monthly Market Overview Top Ranked Companies September 2018 - Volume 12, No 141
Top Ranked Companies - August 2018 Turnover Value* % Total Turnover (million US$)
Mellat Bank 0.4% Mellat Bank was established in 1979 with the merger of ten pre-revolution 12.8 private banks in Iran. From the outset, the operations of the bank have included various commercial banking services.
Jam Petrochemical Company is a major petrochemical producer Jam Petrochemical located in Iran’s Assaluyeh region by the Persian Gulf. In August 12.4 0.4% 2013, the company went public by offering its shares on the Company Iran Fara Bourse market. As one of the largest petrochemical producers in Iran, Jam produces a variety of petrochemical products, namely olefin, HDPE, LLDPE and butadiene.
Founded in 2003 and privatized in 2009, the company HiWeb is active in telecommunications and provides internet 5.5 0.2% services across the country. It has a government contract to provide high speed internet services to 25,000 villages across Iran over 10 years. In 2017, HiWeb was listed on the Tehran Stock Exchange. Iran Investment Founded in 2011, Iranian Investment Petrochemical Group 0.1%
Top 5 Traded by Value Traded 5 Top Company (IIPGC) is an investment holding company Petrochemical Group 2.5 specialized in the petrochemical sector. The holding invested in manufacturing units producing chemical products and machineries.
Established in 1968, MSA Co. is a leading manufacturing, general contracting and EPC Machine Sazi Arak contracting company in Iran specialized in design, 0.1% fabrication, installation and servicing a wide range (MSA) 1.9 of equipment utilized in oil, gas, petrochemical, power plant, mines and cement industries. Market Cap % Total Market Cap. (million US$) Persian Gulf PGPIC was established in the first phase of the privatization of Iran’s Petrochemical 2.8% petrochemical sector when the National Petrochemical Company (NPC) 3,549 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 Company, one of the largest industrial complexes Mobarakeh Steel in the country, started its operations in 1991 with a nominal capacity Manufacturing 2.5% of 2.4 million tons per annum. Mobarakeh Steel is the largest steel 3,164 producer in the Middle East and North Africa region.
In 1972, Sarcheshmeh Copper Mines Joint Stock Co of Kerman National Iranian was established and, later, in 1976, it was renamed to National 1.8% Iranian Copper Industries Co. to cover all copper mines operations Copper Ind. Co. 2,196 throughout the country. This company is active in the extraction & utilization of copper mines, production of copper concentrates & manufacturing copper products.
Pars Petrochemical Co. manufactures and markets petroleum and petrochemical products. The company offers ethane, Pars Petrochemical 1.5% propane, butane, ethyl benzene, and ethylene. The company Company 1,839 was founded in 1998 and is based in Asaluyeh, Iran and was listed in 2018. Pars Petrochemical Co. Operates as a subsidiary of Persian Gulf Petrochemical Industry Co.
Top 5 by Market Capitalization Top Founded in 1991, Golgohar Mining & Industrial Golgohar Mining & Company is one of the largest iron ore and iron 1.5% pellet producers in Iran. The company operates Industrial Company in combined plants among six iron mine zones 1,817 about 55 km southwest of Sirjan city near Kerman province.
Source: Tehran Stock Exchange, Firouzeh Asia Brokerage. All figures in US$ are converted from IRR at the unofficial rate. * Weekly data as of trading week ending 31 August 2018 . 14 Iran Investment Monthly Market Overview TSE Statistics September 2018 - Volume 12, No 141
TSE Statistics - Day Ending 29 August 2018 Highest Daily Traded Sectors with Highest Daily Change
Company Volume (m Shares) Value (m$) Index Value % Change 29-Aug-18 Company 29-Aug-18 28-Aug-18
Mellat Bank 1 33.3 Oil Products 555 4.9
Hi Web Co. 121 14.3 Chemicals 2349 2.9
Machine Sazi Arak Mfg. Co. 168 4.9 Industrial Conglomerates 8,776 2.6
Esfahan Oil Refining Co. 37 4.8 Base Metals 12,105 2.7
Index Information
Index Info Value %Change from 29-Aug-18 28-Aug-18
TSE All-Share Index 137,472 0.5
TSE30 Index 6,730 0.1
Traded Value (US$ million) 221 46.9
Volume (million shares) 3,748 67.9
Top Influencers
Average Daily Trade Volume Close ($Cents) %Change from 29-Aug-18 28-Aug-18
Persian Gulf Petrochemical Ind. Co. 18.50 3.2
Mellat Bank 3.00 16.6
Pars Petrochemical Co. 79.90 2.4
Esfahan Mobarakeh Steel Co. 11.00 0.9
FX Movements - August 2018 Official Rate
-4.7%* IRR per US$
Source: Firouzeh Asia Brokerage, Bonbast All figures in US$ are converted from IRR at unofficial rate, unless otherwise indicated. * Daily data as of trading week ending 29 August 2018 . ** 1 August 2018 Vs. 29 August 2018 .
15 Iran Investment Monthly Iran’s Fixed Income Market Iran’s Fixed Income Market September 2018 - Volume 12, No 141
Iran’s Fixed Income Market From the start of the Iranian calendar year (March 2018) to end-August, total issuance on the fixed income market reached 761 million US$ based on the unofficial exchange rate. Yield to maturity (YTM) remained stable at 28% at the end of August.
Iran’s Debt Securities Market - August 2018 0.6 4.7 Tehran Stock Exchange Iran Farabourse (Junior Market)
Market Value (billion US$)*
2.3 23.6 Tehran Stock Exchange Iran Farabourse (Junior Market)
Average Daily Trading Value (million US$)
266,310 3,050,809 Tehran Stock Exchange Iran Farabourse (Junior Market)
Average Daily Trading Volume (bonds) * As of 30 August 2018
Value & Breakdown of Sukuk Issuance in Iran’s Capital Markets, 2018* (billion US$)
Billion US$
Source: Iran Farabourse *Calculated by the unofficial exchange rate in the period of issuance. Iranian calendar year 1397
16 Iran Investment Monthly Market Overview Iran’s Fixed Income Market September 2018 - Volume 12, No 141
Snapshot of the Highest Yielding Debt Securtites1 - August 2018
Issuer Type YTM (p.a.) Maturity
Sukuk Saipa404 Ijara 39.360 1-Jul-21
TreasuryBill200915 TreasuryBill 32.660 15-Sep-20
TreasuryBill200818 TreasuryBill 32.270 15-Nov-20
Sukuk Saipa403 Ijara 31.680 24-May-21
Murabaha Saipa18% Murabaha 30.980 16-Nov-20
SOV.Mush9SPL201129 Mosharekat 30.730 29-Nov-20
SOV.Mush8SPL200120 Mosharekat 30.720 20-Jan-20
SOV.MRB2-LTS210206 Murabaha 30.280 6-Feb-21
TreasuryBill191202 TreasuryBill 29.690 2-Dec-19
Sovereign Ijara Ijara 29.610 16-Mar-20
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 & Inflation Rate
28.0%
Iranian T-bills YTM in IRR Term (%) 24.2% Iran Inflation Rate (Y/Y, %)
Source: Tehran Stock Exchange, Iran Farabourse, Central Bank of Iran
17 Iran Investment Monthly Economic Review Latest Updates September 2018 - Volume 12, No 141
Iranian Rial Devaluation and Tehran Stock Exchange Performance:
Background The devaluation of the Iranian rial from early 2018 led to a surge in demand for foreign currency. The high elasticity of foreign currency demand reached a point where the government stepped in and introduced four different foreign exchange markets for various sectors. Since April 2018 the government has attempted to regulate these different markets. Following trial and error measures four foreign exchange markets are currently active and regulated, as briefly illustrated in the following table:
Table 1: Foreign Exchange Markets
Market Name Regulator Commodities/Services IRR Rate per US$*
Official Market CBI Basic goods (Pharma, Wheat) IRR 42,000
Secondary Market CBI All imports and exports excl. basic goods IRR 120,000 – 130,000
Iran Mercantile Locally produced commodities (Copper, Iron ore, Oil refinery Commodity Market ~ IRR 70,000** Exchange products etc)
Exchange It is only available in small quantities and applicable to limited Unofficial Market IRR 137,000 Houses applicants, such as tourists and students for example.
Source: CBI, Sanarate.ir, bonbast, Iran Mercantile Exchange
*Quoted rate are as of ending 12 September 2018 ** Calculated as of average exchange rate on traded commodities in the Iran Mercantile Exchange Emerging markets have a long history of currency devaluations, and the recent devaluation in Iran was similar to many emerging and frontier markets. In the August issue we reviewed the currency devaluation in these markets and analyzed to what extent their stock markets were affected. We saw that in more developed markets with higher capital mobility, the relationship between stock market and foreign exchange market was two-way. In the October issue we will consider an econometrics model for the 2011-2013 devaluation of the rial as we have sufficient data to shed light on its causes as well as fundamental factors regarding the impact on the stock market.
In the following section we will review how other markets were affected by the recent devaluation from the beginning of 2018.
Iranian Rial Devaluation and Other Markets’ Reaction
• Gold Market: The gold market was one of the first markets to react to the devaluation, with prices gaining in tandem with the dollar exchange rate. The CBI facilitated purchases of gold coins by introducing pre-selling of gold coins and futures trading on the Iran mercantile market in order to absorb part of the speculative demand from investors responding to the exchange rate movements. • Stock Market: The stock market’s response lagged behind the gold and foreign exchange markets for fundamental reasons. When devaluation began, the government did not allow major industrial companies to sell their final products based on unofficial exchange rates and they were told to sell their final goods at the official rate instead. This mixed policy was the key reason behind investors’ delay in buying listed companies. • Housing Market: The housing market started to catch up slowly with the devaluation. This was because the housing market is less liquid and prices vary across different locations in Tehran. Taking note of the supply of
18 Iran Investment Monthly Economic Review Latest Updates September 2018 - Volume 12, No 141
unsold residential and commercial units during recession, analysts believe the housing market has room to grow, especially in prime locations. • Goods and Services: Despite government efforts to control and regulate prices, the general prices of goods and services increased with devaluation but were less volatile than expected, especially for locally produced goods. Prices of imports and luxury goods increased substantially. The CBI basket for calculating the CPI is highly based on locally produced goods.
IRR Exchange Rate Exchange Rate (IRR Per US$)
Gold Market Stock Market Normalized in IRR Normalized in IRR
Housing Market Inflation Normalized in IRR CPI Index
Source: Tehran Stock Exchange, Central Bank of Iran, Bonbast
19 Iran Investment Monthly Economic Review Macroeconomic Data September 2018 - Volume 12, No 141
Macroeconomic Data Iran Economic & Market Data Iran Macroeconomic Forecast Calendar Gross Domestic Product Unit 2017/ 18 2018/ 19 2019/ 20 CBI: Selected Economic Indicators for June (Billion US$) Released: 12 September 2018 Nominal GDP 432 419 413
Real GDP Growth (%) 3.7 4.0 4.0
CBI: Selected Economic Indicators for (%) spring 1397 Inflation 9.6 12.1 11.5 Released: 11 August 2018 Export (Billion US$) 98.1 - -
SEO: Iran Capital Market Insight (August Import (Billion US$) 75.5 - - 2018) Released: August 2018 Non Oil Export (Billion US$) 39.8 - -
Source: International Monetary Fund - Iran Country Report, March 2018 - IMF Staff Visit Article IV Mission to Islamic Republic of Iran in January 2018 - Central Bank of Iran - Secu- rity Exchange Organization - Statistical Centre of Iran.
20 Iran Investment Monthly Turquoise Partners About Turquoise Partners September 2018 - Volume 12, No 141
About Turquoise Partners
Since 2005
Turquoise is a leading investment group based in Iran that offers a full range of financial services to select investors looking at the Iranian market. The group operates across four core areas: investment management, brokerage, corporate advisory and private equity/venture capital. Turquoise also manages more than 75 per cent of all existing foreign portfolio investments on the Tehran Stock Exchange. Its asset management division offers an EU-regulated equity fund tailored specifically to foreign investors and invests exclusively in the Iranian securities markets. The fund is jointly advised by Turquoise Partners and emerging market specialist Charlemagne Capital.
Firouzeh Asia, the group’s brokerage division, is the market leader in foreign investment and execution, and publishes English language market research, news and analysis. In addition, Turquoise is the only Iranian financial services group to have a significant track record in private equity investing and currently manages two listed private equity investment vehicles.
Turquoise’s corporate finance team offers a full suite of advisory services including mergers and acquisitions, restructuring, market entry and capital raising, for international clients seeking to enter the Iranian market as well as leading Iranian companies.
21 Iran Investment Monthly Turquoise Partners About Turquoise Partners September 2018 - Volume 12, No 141
Asset Management
Turquoise Asset Management has established an • In early 2017, Turquoise Partners launched the 1st outstanding reputation and robust performance track Sovereign Bond Fund with a target return of 15-20% record in the Iranian equities market. The group is in local currency terms. The Turquoise Partners known as a leading investment firm with a strategy Sovereign Bond Fund is an actively managed of value investing and long term capital growth; it strategy with low volatility that invests in a specializes in attracting foreign investors to invest in range of Iran’s sovereign-backed fixed income one of the most undervalued financial markets in the assets with the objective of delivering high world. stable and absolute returns over time. The Our investment team is comprised of experienced fund adopts a concentrated approach, utilizing professionals with more than 20 years experience a core portfolio of Iranian Government bonds across international and domestic financial markets. backed by the Central Bank of Iran as the Our investment decisions are guided and supported ultimate guarantor. Sovereign Fixed Income by our investment and advisory committees, access securities include; Islamic Treasury Bills, to detailed market information, and our on-the-ground Ijarah Sukuk, Musharakah Sukuk & Murabaha presence in Iranian financial markets over the last 10 Sukuks. years. Our commitment to maintaining the highest standards, • Having operated in the Iranian market for over along with our long term growth strategy has allowed a decade, Turquoise has accumulated a first us to gain an unparalleled reputation as the leading rate database of market data and information. asset management firm inside Iran. The firm’s electronic newsletter, Iran Investment Monthly, has been consistently Asset Management Division: Products & Services published for over 12 years and has a wide readership of over 6,000 investors and Iran Turquoise Partners launched Iran’s first equity fund enthusiasts. This newsletter and other regular in May 2006, tailored for foreign investors. With research products of the firm, are the only free over 10 years of track record, the fund has grown source of English language research on the to be the largest foreign investor on the Iranian Iranian economy and capital markets. capital markets. The investor base of this fund is almost all European with a mix of institutional, family offices, high net worth individuals and private professional investors.
• In 2015, Turquoise Partners and Charlemagne Capital launched the first EU regulated alternative investment fund for Iran. This fund is now operational and is open to global investors aiming to get exposure to the Iranian market.
For more information about products and services offered by Turquoise Partners please contact: [email protected]
22 Iran Investment Monthly Turquoise Partners About Turquoise Partners September 2018 - Volume 12, No 141
Corporate Advisory Brokerage
Our corporate finance team is comprised of senior Firouzeh Asia, the brokerage arm of Turquoise Iranian and international bankers based locally and in Partners, is the leading broker offering access to London. We deliver mergers and acquisition advisory, Iranian securities markets for international investors. restructuring, market entry and capital raising services Over the years, Firouzeh Asia, as a fully licensed to international clients seeking to enter the Iranian brokerage company under the Securities and market. We also assist Iranian domestic corporates to Exchange Organization of Iran, has been a pioneer access global markets through strategic partnerships. in servicing international investors as well as offering We seek to combine in-depth local knowledge and professional services to its domestic clients. Firouzeh access with international investment banking best Asia has a presence in four major Iranian cities: practices. Tehran, Isfahan, Rasht and Yazd.
In cooperation with Turquoise’s market leading equity Brokerage Division: Products & Services brokerage, we deliver capital markets services, including public markets capital raising and structured • Securities Dealing products, to Iranian corporate clients and foreign and Online trading platform with live market data domestic institutional investors. for all customers Telephone orders Corporate Advisory Division: Products & Services Block trades Dedicated trading station for large customers • Advisory Reports: in-depth research reports tailored to the corporate advisory division’s policies, • Managed Accounts providing due diligence research on specific Investment advice (institutional clients only) listed or non-listed companies and their sectors’ outlooks, in English. • Capital Market Advisory Listing and IPO advisory Fixed income securities issuance and placement
• Index ETF Launch of Iran’s first index-linked ETF (TSE- 30 ILETF) in January 2015 Client portfolio management Index ETF Fixed Income (Firouza ETF)
• Equity Research Report: an in-depth research report tailored to the Turquoise Investment Strategy which provides the latest developments in a selected number of listed companies (including their sectors), in English.
For more information about products and services offered by Turquoise Partners please contact: [email protected]
23 Iran Investment Monthly Turquoise Partners About Turquoise Partners September 2018 - Volume 12, No 141
Private Equity/Venture Capital
Turquoise is one of the only Iranian financial firms with a significant track record in private equity investing. Our investment team has been operating on the ground since 2005 and has invested on its own behalf, with co-investment partners, and as a manager in the most attractive growth sectors of the Iranian economy. Transactions have included private investments in FMCG, financial services, real estate and technology-based venture capital.
Our private equity capabilities include experience in all phases of the investment process including market analysis, due diligence for investors in the Iranian environment, interface with regulators and other governmental authorities, investment restructuring, exit management and undertaking all the reporting and investment monitoring expected of a private equity fiduciary.
Private Equity Division: Products & Services
• The Turquoise Group has made private equity investments both on its own and with partners in a variety of sectors including consumer, financials, technology and real estate amongst others.
• Advisory Reports: in-depth research reports tailored to the corporate advisory division’s policies, providing due diligence research on specific listed or non-listed companies and their sectors’ outlooks, in English.
For more information about products and services offered by Turquoise Partners please contact: [email protected]
24 Iran Investment Monthly Turquoise Partners About Turquoise Partners September 2018 - Volume 12, No 141
Ctrl+Tech
In early 2017, and in line with Turquoise’s history A market which boasts: of identifying and acting upon new opportunities, • A young and tech-savvy demographic where we launched a tech incubator in North Sohrevardi, almost two-thirds of Iran’s 80 million population is Tehran, by the name of Ctrl+Tech. Ctrl+Tech aims under the age of 35 to build and develop exciting tech start-up ideas in • The highest internet usage in the Middle East Iran, with a mandate to not only focus on launching where Iran is responsible for almost 40% of the ‘proven-concept’ business models that exist and have entire region’s usage demonstrated success elsewhere in the world, but • A rapidly growing smart-phone penetration rate, also on innovative new ideas that should resonate well estimated at 48 million users - up 2,300% in the in Iran’s burgeoning start-up environment. past 3 years
Ctrl+Tech currently consists of a carefully assembled After 5 months of full operation, Ctrl+Tech successfully team of 16 individuals all of whom are passionate launched it’s first project in early October 2017 - an about building new apps for the domestic market. Our exciting job-search platform: 3sootjobs. team of talented founders, developers, designers, and tech gurus are backed and supported by senior 3sootjobs is revolutionizing Iran’s job-search market by mentors and members of Turquoise Partners, allowing creating and introducing a smart, fast and easy-to-use Ctrl+Tech to leverage off Turquoise’s wealth of platform (app and website) that will allow job seekers expertise and experience in Iran’s digital landscape. and employers to instantly search, and connect, using an algorithm-led software. Turquoise created Ctrl+Tech in order to build a platform Since launch, 3sootjobs has shown impressive growth that will grow strongly in Iran’s flourishing technology and success, where it has attracted thousands of market. users in the first week, scored 96% 5* ratings on Cafe Bazaar, and successfully closed a seed funding round.
For more information about products and services offered by Turquoise Partners please contact: [email protected]
25 Iran Investment Monthly Turquoise Partners News & Views September 2018 - Volume 12, No 141
News & Views
Recent Research
Iran Daily Market Update – September 2018 September 26, 2018 September 25, 2018 September 24, 2018 September 23, 2018 September 22, 2018
26 Iran Investment Monthly September 2018 - Volume 12, No 141
Turquoise Partners No. 10. 7th St. Khaled Eslamboli (Vozara) Ave. Tehran, Iran Tel: + 98 21887 26 681 Fax: +98 21 881 07 746 Email: [email protected]
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