Iran Weekly Market Report - 28.01.2016

The Tehran Stock Exchange experienced solid growth in the last week of January 2016. This week, the TSE All-Share Index recorded positive returns for five days in a row and recorded an increase of 6.68%, closing at 71,011. It is the highest the index has closed at since December 2014. On Wednesday, the All-Share Index rose to 71,492, but then re­ceded by 0.68% in the final hours, closing at 71,011. The positive performance of the TSE’s main index was supported by most sectors this week. Among the major sectors, Automotive (+15.06%), Metallic Ore (+14.28%) and Base Metals (+9.67%) were the main movers behind TEDPIX’s weekly surge. Transportation & Logistics (-1.23%) was the only major sector which negatively affected the index. Over the last two weeks, optimism about the Automotive sector has resulted in extraordinary growth for auto companies’ shares, while Banks, the other sector affected by the sanctions, experienced lower growth this week, increasing by 8.86%. Investors placed higher values on mining and metals companies this week, following slight improvements in the prices of some global commodities. Esfahan Mobarakeh Steel Co. (FOLD +11.25%) was one of the shares that exerted the greatest influence on the TSE All-Share Index, even though the company’s projected income for the current financial year projects a sharp drop from the previous year. In an audited report published on January 19, 2016, FOLD reduced its projected net income for the financial year ending March 19, 2016 by 8% to IRR 9,422 billion (approx. USD 262 million). This is 60% lower than the previous year. The engineering company, Mapna Group (MPAN 10.3%), was also one of the other top influencers on the TSE’s main index. The unaudited 2Q reports of the company show an increase of 18% in net income, reaching IRR 2,095 billion (approx. USD 58 million). The company’s projected net income for the year ending on March 19, 2016 is IRR 6,220 billion (IRR 173 million), 3% higher than the last year.

A technical analysis of this week’s performance highlights that the TSE All-Share Index decisively surpassed the resistance level of 70,000, but dropped slightly after getting close to 71,500. The poor return of the index on Wednesday might mark the beginning of a slower pace of growth, though market sentiment remains bullish and the current up­trend has been supported by strong market volume. The TEDPIX is already above the 50 day EMA by around 11%, reflecting its quick surge. If the current surge continues, the index is likely to experience resistance at 76,500, a level which blocked the index’s up­trend in November 2014. Technical analysis indicators suggest there is potential for fur­ther growth, though the Money Flow Index and RSI have been signaling an overbought status for over a week. If the index falls below the 70,000 level, the current outlook could change.

The index of the thirty largest companies by market capitalization, the TSE30 index, rec­orded a 7.75% increase, closing at 3,036. Iran Khodro (IKCO +19.1%) experienced the highest gain among the top 30s. There is positive sentiment regarding auto companies’ ability to upscale production and widen their product range by cooperating with interna­tional auto companies. Iran Khodro and Peugeot are currently in negotiations to develop a product line of Peugeot cars inside Iran via a joint venture partnership. Peugeot cars are one of the dominant brands inside Iran with 36% of market share, assembled through IKCO’s factories. The weakest performance in the TSE30 index was recorded by Pardis Petrochemical Co. (PRDZ +0.81%). On Sunday, the company published unaudited pro­jections for the year ending September 21, 2016. PRDZ expects to earn IRR 9,966 billion (approx. USD 278 million) in net profits, showing almost no change from last year’s actual net earnings.

The Average Daily Trade Volume (ADTV) of the market increased significantly to USD 146 million, up 94.6% from last week. The Banks sector recorded the highest traded val­ue this week. The shares with the highest traded value were Tejarat Bank (BTEJ +16.34%), Saderat Bank (BSDR +12.01%) and Mapna Group (MAPN +10.03%). The traded value of Tejarat Bank reached USD 28.5 million, while Saderat Bank reported USD 28.2 million and Mapna Group reported USD 26.9 million.

The FX market saw mixed performances of the Iranian Rial against the major currencies. The Central Bank of Iran (CBI) reduced the official US Dollar rate slightly by 0.01% to IRR 30,183, while the free market rate of USDIRR slipped by 0.05% to 35,865. The CBI added 0.05% to the Euro official rate, leaving it at IRR 32,874. The free market rate of EURIRR reached 39,963, 2.15% higher than last week. The CBI increased the official rate of the British Pound Sterling by 0.49% to IRR 42,999, but the free market rate of GBPIRR ended 0.1% lower than the last week at 51,750.

On Sunday the Iranian Customs Administration (ICA) released its initial overview of the country’s non-oil trade balance for the first ten months of the current Iranian Calendar year (March 21, 2015-January 20, 2016). According to the ICA report, the surplus on Iran’s non-oil trade balance has dropped by 18% to USD 1.8 billion. Iran imported USD 33.8 billion worth of goods in the ten months up to January 20, 2016, while its exports in this period were USD 35.6 billion. Petrochemical products have been the main export items from Iran, and the main markets for Iranian exports have been China, Iraq, UAE and Afghanistan. The main import items have been corn feedstock (3.4%), wheat (2.9%), soybean (1.84%), rice (1.71%) and automobile spare parts (1.61%). The ICA has stopped publishing detailed reports, instead releasing a monthly brief.

The Central Bank of Iran released its latest inflation report on Monday, reporting chang­es to the Consumer Price Index for the tenth Iranian Calendar Month (December 21, 2015-January 20, 2016). According to the CBI, the YoY CPI growth has increased to 9.6%, 0.2% higher than the previous month (November/December 2015). It is the second month in a row that the inflation rate stands below 10%. In comparison with last year, the Education and Health Care categories have recorded the highest growth in the CPI at 21.4% and 18.3% respectively. Tobacco has had the lowest change, adding 1.3%. The MoM CPI has recorded a 0.4% increase from the previous Iranian Calendar Month (November/December 2015). It is considerably lower than the previous MoM figure, which was 1.3%. The highest MoM increase was shown by the Other Products and Ser­vices category, recording a 1% increase, while the two categories of Cultural Expenses & Leisure and Hotel & Restaurant both rose by 0.6%. The Communication category had the lowest change, showing no change over the last month.

The Central Bank of Iran also released its Tehran housing market report on Tuesday. The total number of houses sold in the tenth Iranian Calendar month (December 22, 2015-January 20, 2016) was 16,318. The number of sales has increased by 29% com­pared to last month, and 8.5% on a yearly basis. However the average price of one square meter of residential space declined to USD 1,059, 1.9% lower than the previous month. A YoY comparison indicates a 3.1% drop in the average price.