Iran Weekly Market Report - 29/10/2015

Share prices on the Tehran Stock Exchange had limited fluctuations, which resulted in the TSE All-Share Index closing the week at 62,923, 0.4% lower than the previous week. The trading week started on Sunday due to a public holiday on Saturday. The TSE’s main index experienced the highest weekly change on Sunday, falling by 0.6% and clos­ing at 62,793. The index moved marginally on the remaining trading days of the week, recovering its loss by 0.2%. Some analysts believe that the 6-months reports of a number of companies which were published recently adversely affected the performance of the market on Sunday. Nevertheless, the market resumed its neutral trend during the next three trading sessions.

As a result of the TSE All-Share Index’s recent slips, the market benchmark has closed the gap with its 50 day EMA (+0.9%). Technical analysts also suggest that the current patterns are offering continuous limited changes in the short term while the longer pro­spect still contains the potential for a sharp uptrend toward 70,000 and 75,000 levels. At the moment the TEDPIX is moving in range below the 63,000 level, similar to its trend from mid-May to mid-June after which the index suddenly surged by 11.4% to 69,434.

Also, the index of thirty largest companies by market capitalization, the TSE 30 index, had a minor decline of 0.53% as it closed at 2,714. Similar to the TSE All-Share Index, the TSE30 fell by 0.8% on Sunday and could not recover its losses in the week. This is the third month in a row that index has remained broadly unchanged below the 3,000 level.

Moreover, the Average Daily Trade Volume (ADTV) improved by 14%, reaching USD 40 million. However, a closer look at the week’s transactions indicates this hike was a result of USD 106 million trades belonging to Shiraz Municipality Participation Bonds on Wednesday. Otherwise, the ADTV would have stood at USD 13 million, 70% lower than the previous week. Meanwhile, the top three shares with the highest total traded value were Mellat Bank, Saderat Bank and Ghadir Investment Co. with total trade values stand­ing at USD 4, USD 2.9 and USD 2 million respectively. Compared to last week, Mellat Bank’s share price remained unchanged closing at IRR 1,991 (approx. USD 5.6 cents). On the other hand, Saderat Bank’s shares closed at IRR 905 (approx. USD 2.6 cents) recording a decline of 1.3%. In contrast with the banks, the share price of Ghadir Invest­ment Co. rose by 1.9%, closing at IRR 2,362 (approx. USD 6.7 cents).

Furthermore, the Iranian Rial performed differently against various foreign currencies on the FX market. The official rate of the U.S dollar was set at IRR 29,960 by the Central Bank of Iran, 0.02% higher than the previous week. Similarly, the greenback’s free mar­ket rate reached IRR 34,936, recording a weekly increase of 1.4%. In contrast, the Euro depreciated against the Iranian Rial as its official rate was announced by the CBI at IRR 32,731, showing 3.67% decline on a weekly basis. The free market rate of the EUR reached IRR 38,904, losing 1.28% since last week. The official rate of IRRGBP was set at 45,722 slipping by 1.08%, while the free market rate had a minor gain of 0.09%, as it was quoted at 53,300.

Overall, the most recent financial reports and disclosures by banking, metals and mining companies have verified earlier projections of tough times ahead. The fall in global prices of commodities, low demand levels in the local economy accompanied with high costs of borrowing are considered as the reasons why these companies have underperformed. Nevertheless, some economists believe the economy is currently on a “standby” mode, awaiting the upcoming removal of sanctions. During a live televised interview two weeks ago, the Iranian President stated that current sluggish demand levels are a result of un­certainty in relation to the impacts of sanctions removal; hence postponing purchasing decisions. According to analysts, fundamental issues faced the economy will not be re­solved in the short run after the removal of the sanctions. However, lifting of the sanctions can provide many opportunities for local companies to start or resume collaborations with international actors, potentially generating growth and expansion in the economy.

Furthermore, the Central Bank of Iran released its monthly inflation report on Tuesday this week. According to CBI’s published statement the M-o-M Consumer Price Index has risen by 0.6% in October. However Y-o-Y growth of the CPI is reported at 10.8%, follow­ing the continuous declining pace in the country’s inflation rate. The September report had shown the Y-o-Y inflation rate at 11.7%. According to the recent inflation report, the major price changes belonged to Medical and Education sectors, increasing by 23.6% and 22% respectively, while the Tobacco and Households’ Services and Furniture sec­tors, recorded the smallest gains growing by 2% and 5%.