Iran Weekly Market Report

The Tehran Stock Exchange experienced slight changes during the week, which had fewer trading days due to a public holiday on Saturday. The TSE All-Share Index record¬ed a 0.4% decline compared to last week as it closed at 62,147, recording its lowest measure in two months. The index had reached 63,056 on November 11, however, it has been experiencing slight negative declines ever since, recording a 1.4% drop in five weeks. Some analysts believe investors are anticipating signs of relief in the economy as a result of the removal of sanctions imposed on Iran. This is while the majority of listed companies have been experiencing difficulties in the current financial year, mostly be¬cause of the weak prices in global commodity markets.

According to technical analysis perspective, the TEDPIX has already broken down its 50 day EMA towards lower measures, demonstrating the chance of revisiting the support level existing at 61,500. However, the index’s volatility in recent weeks has been deeply low, reflecting investors’ hesitation for lower prices. Though the indications do not seem to be strong enough to take down the index, there is also no positive signal that the mar¬ket may increase during the next couple of weeks. The TSE All-Share Index needs to surpass the 63,000 level to show growth potentials once again.

Likewise, the TSE30 index, which covers the thirty largest companies by market capitali¬zation, recorded a negative performance this week. The TSE30 index closed at 2,615, recording a 0.26% drop compared to the previous week. Similarly, the TSE30 has been in a negative trend during the previous five weeks, losing almost 100 points or 3.67%. However, Saderat Bank (BSDR) and Chadurmalu Mining and Industrial Co. (CHML) rec¬orded slight increases this week, in contrast with the majority of top 30 stocks. Cha¬dormalu added 0.53% as it closed at IRR 2,362 (approx. 6.5 USD cents), while Saderat Bank closed at IRR 869 (approx. USD 2.4 cents) gaining 1% on a weekly basis.

Moreover, the Average Daily Trade Volume (ADTV) of the market, reached USD 18.4 million which is 16% lower than previous week. The shares with the highest trade values were Mellat Bank, SakhtAjand and Azarab Industrial Co., which recorded USD 7.9, USD 4.3 and USD 3.6 million worth of trades respectively. The share price of Mellat Bank closed at IRR 1,930 (approx. USD 5.3 cents), 0.77% higher than the previous week. However, SakhtAjand Co. (construction investment company), slipped by 0.3%, reaching IRR 6,012 (approx. USD 16.6 cents), while Azarab Industrial closed at IRR 3,224 (approx. USD 8.9 cents), improving 3.6% on a weekly basis.

Meanwhile, the FX market recorded a lower pace of growth by foreign currencies. The Central Bank of Iran set the official rate of the U.S. Dollar at IRR 30,120; recording a mi-nor weekly change of +0.05%. However, the free market USDIRR rate slipped by 0.02%, reaching 36,208. Meanwhile, the official rate of the Euro also declined by 0.5%, reaching IRR 32,688, while its free market rate grew by 1.18% to close at IRR 40,021. The free market rate of the British Pound Sterling slipped by 0.64%, to IRR 54,600, similar to the official rate of GBPIRR which was set at 45,023, 0.38% lower than last week.

Furthermore, as expected, the International Atomic Energy Agency (IAEA) board of gov¬ernors closed Iran’s so called PMD (Possible Military Dimensions) case on December 15, paving the way for the full implementation of Iran’s nuclear accord, reached in July with the EU3+3. According to the nuclear deal, termed the Joint Comprehensive Plan of Ac¬tion (JCPOA), the International Atomic Energy Agency had to examine Iranian nuclear activities in the past and give its report to the board. At the meeting held on Tuesday, the board of governors unanimously agreed to close Iran’s nuclear dossier and end the agen¬cy’s obligation on investigating past Iranian nuclear activities. As such, a major step has been taken in the JCPOA and Iran has stated that it will complete its obligations under the deal in the next two to three weeks. Once the IAEA has verified Iran’s compliance with the terms stated in the JCPOA, UN, EU and nuclear related US sanctions on Iran will simultaneously be removed. During a televised interview Iran’s President, Mr. Hassan Rouhani, has announced that Iran expects the sanctions to be removed in January. Also, IAEA Director General, Yukiya Amano has told Reuters that if everything goes well, the removal of the sanctions can be implemented by the end of January.

In other developments, according to the government’s economic stimulus plan, the Cen¬tral Bank of Iran (CBI) has started the implementation of reducing the required reserve ratio for disciplined banks. According to a decision made by Iran’s Money & Credit Coun¬cil earlier, the reserve ratio can be set at 10%-13% depending on the banks’ state. The disciplined banks that follow CBI’s regulations can enjoy the lower rates. Factors which distinguish the standing of the banks are based on their cooperation with CBI monitors, adherence to disclosure and transparency policies, providing proper reports for credit and regulatory bodies of the CBI and also obeying the maximum interest rates on deposits. The Central Bank reviews the banks’ performances every three months to determine their reserve ratio. According to Iran’s monetary & banking law, the CBI can set the reserve ratio from 10%-30%, depending on the economic state of the country.