Iran Weekly Market Report - February 20, 2017

Tehran Stock Exchange

The TSE All-Share Index ended this week up 0.5% at 77,189, breaking a three-week losing streak. The top performer of the major sectors was Machinery & Electric Equipment (+7.9%), mostly due to further gains by Iran Transfo Corp. (TRNS +11.4%). Its share price has bounced back 21% over the past two weeks after falling 48% between September and November. However over the past three quarters the company has earned only IRR 323 billion (approx. USD 8.4 million) or 22% of its projected net income for the full financial year. The latest monthly sales report by the power transformer manufacturing company showed both weakening sales prices and volumes. It seems that at present speculative demand is supporting TRNS on the TSE. This week the weakest sector was Automotive (-2.7%), mainly due to falls in Iran Khodro (IKCO -2.8%) and SAIPA Group (SIPA -1.1%).

The TSE30 index of the thirty largest companies by market capitalization rose 0.7% to close at 3,122. Chadormalu Mining & Industrial Co. (CHML +9.0%) was the top gainer, boosted by higher iron ore prices on local and global markets. Parsian Oil & Gas Development Co. (PASN -3.6%) was the biggest faller.

The Average Daily Trade Volume (ADTV) surged 43% to USD 73 million with several block trades and market appetite for debt securities. Stocks with the highest traded value over the week were led by National Iranian Copper Industries Co. (MSMI +6.8%), Azarab Industries Co. (AZAB -2.6%) and SAIPA Group, recording USD 5.9 million, USD 5.6 million and USD 5.5 million worth of trades respectively.

Iran Fara Bourse

On the Iran Fara Bourse market, the overall index recovered from last week’s drop, adding 1.7% to close at 849. The IFB’s ADTV soared 269% to USD 203 million, due to strong market demand for debt securities. Total trade volume of debt securities reached USD 794 million, up 326% from last week.

Foreign Exchange Market

On the FX market the official US dollar rate was announced at IRR 32,390 by the Central Bank of Iran, a gain of 0.04% from last week. But on the free market the US dollar slipped 0.2% to IRR 38,108. The CBI reduced the official rate of the euro by 0.6% to IRR 34,382 while its free market rate fell 0.9% to IRR 40,912. The official rate of the British pound fell 0.4% to IRR 40,364 with the free market rate dropping 0.8% to IRR 48,100.

Economic Developments

The Central Bank of Iran has updated its overview of the banking sector for the first nine months of the Iranian calendar year ended December 20. Total private sector debt to the banking system has grown 27% since the same period last year to IRR 16,552 trillion (approx. USD 434 billion). Nearly 52% of this figure is accrued interest owed on the debt. Private sector deposits increased 28% to IRR 11,520 trillion (approx. USD 302 billion) with long-term deposits (currently maximum duration of deposits are 12 months) making up nearly 89% of the total. The CBI report shows that money supply has reached IRR 11,848 trillion (approx. USD 311 billion) which is 28% higher than the same year-ago period and represents almost 71% of estimated GDP for 2016. In the reported period total loans given by the banking system reached IRR 795 trillion (approx. USD 20 billion), up from IRR 608 trillion last year. Total new loans rose 16% quarter on quarter.

The CBI also released data on the government’s budget deficit for the first nine months showing an increase of 55% to IRR 269 trillion (approx. USD 7 billion) compared to last year but little change from the previous quarter. Government tax income rose 29% to IRR 655 trillion (approx. USD 17 billion), while revenues from sales of crude oil and oil products fell 7% from last year to IRR 422 trillion (approx. USD 11 billion). Third quarter tax income gained 51% from the second quarter while oil revenues surged 75%.

The CBI overview of the Tehran Stock Exchange reported 30% growth of the TSE All-Share Index since last year while market capitalization advanced 27% to IRR 3,373 trillion (approx. USD 88.5 billion). Trading volume surged 75% from the previous year to IRR 395 trillion (approx. USD 10 billion). On the debt market the government raised IRR 23,158 billion (approx. USD 607 million) through participation bonds. These debt securities were issued mostly with four-year maturity and coupons ranging from 15% to 21%. The government has increased its exposure to the debt market considerably, as this amount was reported at IRR 899 billion (approx. USD 23.5 million) last year. However municipal participation bonds fell to IRR 12,950 billion (approx. USD 340 million) from IRR 15,267 billion (approx. USD 400 million).

written by Ali Karbalaee and Radman Rabii

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