Iran Weekly Market Report - December 09, 2016

Tehran Stock Exchange

The second week of December saw the market rally to its highest point since last April, helped by rising commodity prices and a firmer US dollar. The TSE All-Share Index rose 1.7% over the week to close at 81,341. In line with increases on global commodity mar­kets, prices of some products - including metals and petrochemical products – have risen on the local Iran Mercantile Exchange, boosting share prices of producing companies on the Tehran Stock Exchange. In addition the recent gains of the US dollar against the Irani­an rial have improved the profit outlook for exporters. Those firms selling products under regulated prices based on the US dollar are also experiencing the same scenario. This week’s top gainer among the major sectors was Metallic Ore (+8.4%), with broad increas­es seen across the sector. Despite significant weekly gains posted by a few sectors, most of the rest fell slightly.  Sugar (-6.2%), known as the alternative sector on the TSE, was the biggest faller over the week. The TSE30 index of the thirty largest companies by mar­ket capitalization experienced faster growth than the All-Share Index, closing at 3,340 with a 2.5% gain. Among the top 30s the biggest gainer of the week was Khouzestan Steel Co. (FKHZ +12.71%), while Fajr Petrochemical Co. (BFJR -1.99%) dropped the most.

The Average Daily Trade Volume (ADTV) continued to increase, adding 15% to USD 74 million and recovering from the USD 45 million level of two weeks ago. Companies with the highest weekly total trade volume included Esfahan Mobarakeh Steel Co. (FOLD +8.3%), Azarab Industries Co. (AZAB -2.53%) and Khouzestan Steel Co. (FKHZ +12.71%), recording USD 13.0 million, USD 10.2 million and 10.1 million worth of trades respectively.

Iran Fara Bourse

Similar trends on the Iran Fara Bourse (IFB) market pushed the overall index up by 3.9% to close at 862. However the ADTV did not change significantly, reaching USD 37 million. Investors’ interest focused mostly on equities on the IFB, recording USD 96 million total traded value.

Foreign Exchange Market

On the currency market, the Iranian rial fell further against major currencies. The Central Bank of Iran added 0.2% to the official rate of the US dollar, quoting it at IRR 32,150. Simi­larly the free market rate of USDIRR rose 0.3% to 38,858. The euro’s official rate was an­nounced at IRR 34,632 by the CBI, a weekly gain of 1.8%. The euro strengthened more on the free market, appreciating by 6% to stand at IRR 42,328. The CBI increased the official rate of British pound sterling to IRR 40,676, up 1.2% on the week. The GBPIRR free market rate grew at the same rate to IRR 49,300.

Economic Developments

Despite their political differences, member states of the Organization of Petroleum Export­ing Countries (OPEC) agreed to reduce their crude oil production to 32.5 million barrels per day (bpd) from 33.6 million bpd in six months from January 2017. In the aftermath of the OPEC agreement, the OPEC basket price rose almost 13% during the week to USD 50.98 a barrel, making a gain of 92% since last January.  According to media reports, Iran is to produce up to 3.9 million bpd under the agreement, almost 0.5 million bpd more than levels that followed talks in Doha last April when OPEC did not reach an agreement to freeze output. Since January Iran’s oil production has increased by almost 30%, with the lifting of nuclear-related  sanctions following the deal reached between Iran and the EU3+3 in July 2015. However lower global  prices have slowed the growth of Iran’s crude oil export revenues. Iran currently exports 2.44 million bpd, according to the latest inter­view by Oil Minister Bijan Namdar Zangeneh, while the latest official report shows that prices averaged at USD 38 from April to September 2016. Sustained price increases fol­lowing the OPEC agreement may help Hassan Rouhani’s government make up for some of the shortfalls in oil revenues, which were 12% down over the first half of the current Ira­nian fiscal year started March 21. On the Tehran Stock Exchange the Oil Products sector began on a positive note in response to the OPEC agreement but gains were limited to about 1% over the week. The sector has increased by 3% in the last four weeks and is up 57% since January.

Written by Ali Karbalaee and Radman Rabii