Iran Weekly Market Report

The Tehran Stock Exchange experienced its first negative weekly performance in the new Iranian Calendar Year. The TSE All-Share Index slipped by 0.9%, closing at 80,752. The TSE’s main index had started the week at 81,480 but didn’t go further than 81,723 before falling back to end the week at 80,752. This week, the Insurance (+11.7%) and Machinery & Equipment (+8.4%) sectors were the top performers, while Oil Products (-4.6%) and Banking (-3.8%) were the weakest major sectors. The growth rate in the larg­est sectors has slowed down. The Automotive sector, which has been one of the main market leaders lately, has dropped by 2.1% this week, while the Chemical sector contin­ued its steady growth by recording a 1.2% weekly increase. The Tehran Stock Ex­change’s sharp increase has paused since the beginning of the new Iranian Calendar Year. Some analysts consider it as an opportunity to buy shares due to future expected growth in the economy in the current year. In the near future, the release of further annu­al reports and also income projections will make the market trend’s direction more obvi­ous. Reviewing the projections of companies which have already released their expecta­tions for the year ahead, shows that their projections are fairly modest compared to the expected growth in the overall economy.

Under a Technical Analysis perspective, the TSE’s main index, the TEDPIX, has faced difficulties in surpassing 81,500. But the expected landscape for continuous growth ahead toward 89,500 has not changed yet.

The index of the thirty largest companies by market capitalization, the TSE30, has experi­enced a larger decrease by dropping by 2.5% to close at 3,363. Jam Petrochemical (PJMZ +4.56%) had the best weekly performance, while Bandar Abbas Oil Refining Co. (PNBA -8.34%) recorded the deepest drop. The only Automotive sector’s representative in the top 30, Iran Khodro (IKCO +3.24%), had started the week on a downward note but the trend changed from negative to positive and the ticker closed up. More news about cooperation between Iran Khodro and Fiat was released this week, in addition to some rumors about Fiat’s interest in buying Iran Khodro shares. The Italian Prime Minister, Matteo Renzi, will visit Iran next week. There are rumors about the finalization of the con­tracts between Fiat and Iran Khodro will take place during the Italian Prime Minister’s visit.

The market Average Daily Trade Volume (ADTV) rose by 36% this week, reaching USD 104 million. However, the increase in the ADTV would have been significantly lower if USD 23 million worth of Sabzevar Municipal Participation bonds trades had not taken place. The shares with the highest trade volumes were SAIPA Investment Co. (SSAP +4.8%), Iran Khodro (IKCO +3.24%) and SAIPA Group (SIPA -5.5%) in recording USD 57, USD 51 and USD 31 million respectively.

In the FX Market, the official rate of the US Dollar was announced at IRR 30,274 by the Central Bank of Iran, without significant change compared to the last week. The free mar­ket rate of USDIRR slipped by 0.2% reaching 34,832. The CBI increased the official rate of Euro by 1% to IRR 34,508, while the free market rate increased by 1.3% to IRR 39,528. The British Pound Sterling dropped versus the Iranian Rial. The official Rate of GBPIRR was quoted at 42,717 by CBI, 1.8% lower than the last week. The free market rate of GBPIRR declined by 1.6% to 49,250.

The statistical Centre of Iran released the unemployment rate of the country in the previ­ous Iranian Calendar Year (2015/16). According to the SCI, the unemployment rate of the country has been 11%, 0.4% higher than the previous year. The general unemployment rate considers the labour force above 10 years old, while the unemployment rate of the labour force in the ages 15-29 has been 23.3%. One year earlier this rate was an­nounced at at 21.9%. The SCI’s report shows the services sector’s share in the total em­ployment of Iran has increased by almost 1%, reaching 49.4%. The agricultural sector has not witnessed a significant change by adding only 0.1% to 18%. The number of em­ployees in the industrial sector has fallen by 1.3%, amounting to 32.5% of total employ­ees. Some Iranian economists believe that the Iranian job market’s tendency is hiring more laborers than skilled workers. These experts believe that the unemployment rate for skilled workers should be 23%-24%, while they consider the unemployment rate for la­borers to stand at around 5-6%. The improvement of the job market has been one of the targets of Hassan Rouhani’s government. The Money & Credit Council had put it as the main target of the monetary & fiscal policies in the previous Iranian Calendar Year, which has not lead to an improvement yet. Iran’s government may consider more supportive plans for the industrial sector in the current year. Mohammad Bagher Nobakht, Head of Iran’s Management & Planning Organization, discussed the stimulus plans, while giving a speech in a ceremony for national and regional job distribution in order to increase na­tional production. According to Nobakht, 19.4% of the 36,000 firms in the industrial sector are not active, even though they would be able to add 7,000 new jobs to the economy.

Loans with lower interest rates are the government’s proposed solution for inactive firms and plants that are under construction with at least 80% physical progress. The govern­ment is aiming to provide the working capital to boost production, targeting a lower unem­ployment rate.