Iran Weekly Market Report - June 17, 2016

The Tehran Stock Exchange experienced further falls in share prices in the second trading week of June. The TSE All-Share Index fell by 2.63% to close at 73,877, reaching its low­est level since early February 2016. Since the removal of sanctions on Iran in January 2016, the TSE’s main index had surged by 31% in three months to 81,500. However, in the last two and a half months the index has lost 9% of its gains. Some experts see this as an adjustment in investors’ expectations, as the economic benefits of the removal of sanc­tions have not materialized as quickly as some had hoped. The continued slump in the price of commodities has also affected the Iranian stock market.

This week, all major sectors recorded negative returns, except Metallic Products (+3.1%) and Pharmaceuticals (2.1%). In the pharmaceutical sector, Razak Laboratories Co. (DRZK +12.87%) was the market leader by having the highest weekly gain. Machine Sazi Arak Co. (MARK +6.5%) was the main reason behind the positive performance of Metallic Products sector. The weakest sector of the week was Automotive (-7.4%), experiencing broad declines across its listed shares. The two main companies in the sector, Iran Khodro (IKCO -8.87%) and SAIPA Group (SIPA -7.36%) were among the weakest on the TSE.

From a technical analysis perspective, the All-Share Index’s negative divergence from its 50 day EMA has increased again and is now standing 3% below it. The index’s current negative moves are considered as adjustments in the uptrend that had started at 61,700 in January 2016, and expectations for further falls are low. The next support level is stand­ing at 71,500, while the index is already at its lowest level in four months.

The top 30 stocks of the Tehran Stock Exchange recorded weaker performances than the whole market. The TSE30 index, the index of the thirty largest companies by market capi­talization, dropped by 3.23%, closing at 2,981. This week, the majority of the top 30s had negative performances except Jam Petrochemical Co. (PJMZ +0.73%), which experi­enced a slight gain. Iran Khodro (IKCO -8.87%) was the weakest as its share price fell the most. The TSE30 index has lost 13.5% during the last 10 weeks; however it had in­creased by almost 34% from January to April.

Similar to the negative trend of the market, the Average Daily Trade Volume (ADTV) also decreased. The ADTV fell by 44% to USD 55 million, although the previous week’s figure had been inflated due to trades on the Oil Ministry’s participation bonds. This week, SAI­PA Group (SIPA -7.36%), Azarab Industries Co. (AZAB -4.19%) and Machine Sazi Arak (MARK +6.55%) recorded the highest weekly traded value with USD 18.4, USD 16.3 and USD 16.1 million worth of trades respectively.

Investors in the Iran junior market, Iran Fara Bourse (IFB), witnessed lower prices on the IFB trading board as well. The Iran Fara Bourse Overall index closed at 777, 3.9% lower than the previous week. Also the IFB’s Average Daily Trade Volume decreased by 24% to USD 43 million. Among the shares listed on the IFB, Saman Insurance Co. (BSMZ +19.3%) rose the most. The weakest performance was recorded by Esfahan Steel Tuka Paint Co. (TPSZ -14.41%).

In the FX market, the Central Bank of Iran increased the official rate of the US Dollar by 0.1% to IRR 30,529. The free market rate of USDIRR reached 34,775, 0.5% higher than
last week. In contrast to the US Dollar, the Euro depreciated versus the Iranian Rial. The official rate of Euro was reduced by 1.1% to IRR 34,403 by the CBI. The free market rate of EURIRR pair also declined by 1% to stand at 39,184. The CBI decreased the official rate of British Pound Sterling by 2.1%, quoting it at IRR 43,305. GBPIRR’s free market rate dropped by 1.9% to reach 49,350.

The Statistical Centre of Iran released the latest employment report of the country, cover­ing winter 2016 which is the last season in the Iranian Calendar Year (ended on March 19, 2016). According to this report, Iran’s unemployment rate has reached 11.8%, 1.1% high­er than the previous season. The Year-on-Year comparison also shows a 0.3% increase in the unemployment level. SCI has also reported the Participation Rate at 41.2% for the population older than 15 years old, which shows a drop of 0.5% on a seasonal compari­son. But the rate has increased by 0.5% on a yearly basis. Reviewing employment in dif­ferent sectors reveals the Service sector has the highest share in employment with 51.5%, while the Industrial sector’s share is 32.4% and Agriculture is 16.1%. In comparison with one season earlier, the share of the Service sector has increased by 1.7%. The Agricul­ture sector has witnessed a 1.5% drop, while the share of the Industrial sector has slipped by 0.2%.

written by Ali Karbalaee and Radman Rabii