Iran Weekly Market Report - 21.01.2016

Share prices on the Tehran Stock Exchange witnessed increases for the fourth week in a row, following the implementation of the nuclear agreement between Iran and EU3+3, termed the Joint Comprehensive Plan of Action (JCPOA). On late Saturday night, Iran’s foreign minister, Javad Zarif, and High Representative of the European Union for Foreign Affairs and Security Policy, Federica Mogherini, announced through a joint statement, the so called ‘implementation day’ of the agreement, paving the way for lifting of the sanc­tions against Iran. The Iranian equity markets entered into a new phase since Saturday, experiencing higher trade volumes and larger gains. The TSE All-Share Index increased by 4.8% this week, to close at 66,562, recording the highest weekly gain since April 9, 2015. The TSE’s main index had a rapid recovery during the week, growing from around 63,500 to more than 66,000 after four months of fluctuations below the 63,000 level. The Telecommunication, Automotive and Transportation & Logistics sectors had the highest growth as their indices rose by 16%, 13.4% and 10.1% respectively. On the other hand, Machinery & Electric Equipment, Metallic Ore and Banking sectors had the weakest per­formances among major industries, losing 2.4%, 1.2% and 1.1% respectively.

By Technical Analysis perspective, the TEDPIX broke the resistance level of 65,000 quite easily, though it faced minor resistance by having a negative daily return of 0.47% on Tuesday. The TSE All-Share Index has already gone above its 50 day EMA by almost 6%, portraying bullish sentiment in the market. The next market resistance level is ex­pected to be faced at the 70,000 level, however the index may witness minor resistance before reaching 67,000 as well. At the moment, the Money Flow Index suggests the mar­ket benchmark has already entered overbought territory, having this signal for the first time since July 2015. The last time the MFI had suggested overbought status, the index fell from 69,433 (mid- July 2015) and went through a sharp drop to reach 66,000. Howev­er, other technical analysis indicators are insisting on the continuation of the current up­trend, including Bollinger Bonds, Stochastic and MACD. Furthermore, chart study factors are proposing a smooth growing scenario for the main index, heading to 70,000 level.

Moreover, the index of the thirty largest companies by market capitalization, the TSE30 index, continued its growing trend as it closed at 2,817, 4.9% higher than the previous week’s close. During the last four weeks, the TSE30 index has had stronger positive moves than the TSE All-Share Index, as the majority of top gainers were among the TSE30 stocks. SAIPA Group (SIPA 21.2%) and Iran Telecommunication Company (MKBT 18.7%) recorded the highest growth among the top 30 shares this week.

Also, the Average Daily Trade Volume (ADTV) of the market rose by 17% this week, reaching USD75 million. Shares with the highest traded values were Mellat Bank (BMLT +0.14%), Pars Khodro (PKOD +9.6%) and Tejarat Bank (BTEJ +0.68%). The traded val­ue of Mellat Bank rocketed to USD 16.8 million, while Pars Khodro (auto manufacturer) recorded USD 13.9 million, and Tejarat Bank had USD 13.0 million worth of trades.

Furthermore, the FX market witnessed fluctuations by various foreign currencies against the Iranian Rial. The Central Bank of Iran left the official rate of USDIRR unchanged at IRR 30,185. Nevertheless, the free market rate of USDIRR reached 35,882, declining by 1.9%. The CBI also kept the official rate of Euro fixed at 32,856, however the free market rate of EURIRR dropped by 2.6% to 39,121. The official rate of British Pound Sterling was depreciated by CBI to 42,790, 1.6% lower than the previous week. Likewise, its free market rate decreased by 2% to IRR 51,800.

In other developments, Iran and the EU3+3 announced the implementation of the JCPOA on Saturday, as the International Atomic Energy Agency (IAEA) approved the fulfillment of Iran’s commitments as agreed under the deal reached in July 2015. As the ‘implementation day’ of the deal arrived, all sanctions related to Iran’s nuclear program, which were imposed by the UN, USA and EU were officially lifted or in the case of the US, suspended. One of the first steps following implementation was the official removal of restrictions on most banks in the Iranian banking system. The Central Bank of Iran an­nounced on Wednesday that restriction on using the SWIFT network have been lifted, and reconnection by Iranian banks is expected in the coming days. In detail, sanctions on the Central Bank of Iran, Mellat Bank, Melli Bank, Tejarat Bank, Refah Kargaran Bank, Export Development Bank of Iran, Sepah Bank, Sina Bank, Tose-e Ta’avon Bank, Post Bank, and Bank of Industry and Mines have been removed. Also, local media reported the opening of hundreds of Letters of Credit since Sunday. Furthermore, there is wide speculation about the amount of funds that will be available to Iran now that the sanctions have been lifted. Governor of the Central Bank of Iran gave an indication about receiving up to USD 32 billion in the next few days. Iran’s oil revenues which were frozen as part of the sanctions are now free to be moved by the Central Bank. Some western media have suggested unfrozen Iranian assets to be around USD 100 billion. Moreover, the lifting of sanctions will also enable Iran to sell its crude oil to European buyers, and increase oil sales internationally. Iran’s oil minister, Bijan Zanganeh, has many times stated that the country will increase production by around 500,000 barrels a day in the near future.