Iran Weekly Iran Market Report - 13.11.2015

The Tehran Stock Exchange experienced minor daily changes during the second trading week of November. The TSE All-Share Index ended the week at 63,056, 0.2% higher than the previous week. This is the second consecutive week that the index is performing positively. Despite the minor weekly changes, the All-Share Index has started rising from its two year low mark of 61,209, experienced on October 6, 2015. A number of analysts believe that the current low levels of volatility is a result of uncertainty regarding the Irani­an economy and the potential implications of the removal of sanctions.

The index of the TSE’s thirty largest companies by market capitalization, the TSE30 in­dex, increased slightly by 0.16% as it closed at 2,714, after two consecutive weeks of recording negative performances. The index’s gain was due to the positive performances of Parsian Oil & Gas Development Co. (+2.7%) and Tamin Petroleum & Petrochemical Investment Co. (+6.3%).

Moreover, the Average Daily Trade Volume (ADTV) of the market declined by 18% (approx. USD 5 million) this week, reaching USD 25 million. The shares with the highest traded values were Iran Kodro, Mellat Bank and Saderat Bank which had USD 13.6, USD 4.2 and USD 3.8 million worth of trades respectively. The share price of Iran Kodro, gained 4.2% to close at IRR 2,048 (approx. USD 5.8 cents). Mellat Bank’s share price slipped by 0.9% to close at IRR 1,972 (approx. USD 5.5 cents). On the other hand, Sad­erat Bank fell by 3.7% as it closed the week at IRR 866 (approx. USD 2.4 cents).

Furthermore, the FX market witnessed different fluctuations by various foreign currencies against the Iranian Rial. The official rate of the U.S. Dollar was set at IRR 29,964 by the Central Bank of Iran (CBI), without any significant change compared to last week. Mean­while, the free market USDIRR rate increased by 0.9%, reaching 35,419. The official EU­RIRR rate dropped by 1%, reaching 32,248, while the free market rate of Euro dropped by 0.9%, to close at IRR 38,418. Moreover, the CBI announced the official rate of British Pound Sterling at IRR 45,620, which is 1% less than last week. The GBPIRR free market rate ended up at 54,100, by gaining 0.37%.

In other developments, Iranian banks announced their agreement to cut annual deposit interest rates by 2% to 18% on Sunday. The reduction of the interest rate will become effective as of November 22, 2015. This is while many expected Iran’s Money and Credit Council to officially reduce interest rates due to a major drop in the rate of inflation in the past two years, now standing at 10.8%. Nevertheless, the Money and Credit Council has not officially changed the interest rates yet. According to the head of public relations at CBI, the banks’ agreement is supported by the Central Bank of Iran. The official interest rates on annual rates, still standing at 20%, is considered as the maximum rate based on CBI’s statement. Meanwhile, the banks are allowed to offer lower rates on deposits if they choose to do so. According to AbdolnasserHemmati, the Money and Credit Council’s Chairman, the final decision on reducing banking rates will be made during the next two weeks.

Also, the implementation of the government’s economic stimulus package, meant to push demand, was initiated this week. This plan supports local manufacturers which produce automobiles, agricultural machineries, and durable household goods to sell their products by giving consumers credit lines for these purchases. It is still too early to determine the effectiveness of the plan, however, Iran Khodro’s CEO announced that the company has already sold 30,000 automobiles through the plan during the first three days of its imple­mentation. It is reported that this figure reached 60,000 cars for all domestic car manufac­turer’s combined. Iran Khodro sold 96,513 and 119,627 cars in the first and second quar­ters of the current Iran Calendar Year (starting March 21). The company’s projections show that it expects to sell 510,392 cars by the end of the current year, which is 20% low­er than last year. A number of experts predict that this stimulus plan may increase car sales by up to 15%.