Iran Weekly Market Report - October 20, 2016

The Tehran Stock Exchange All-Share Index continued to climb higher at the same pace as last week. The main index of the TSE closed at 78,091, marking a 0.6% increase for the second consecutive week. This week the majority of sectors saw positive returns, while Machinery & Equipment (+5.9%) and Metallic Ore (+5.3%) rose the most. In con­trast, Metallic Products (-5.1%) was the weakest sector and recorded the steepest drop. During the third trading week of October investor appetite for companies in the Machinery & Equipment sector was considerably higher. The sector’s index rose mostly on the back of the increase in the stock prices of Iran Tractor Manufacturing Co. (TRIR +3.55%), the value leader in the sector, Iran Combine Manufacturing Co. (COMB +11.62%) and also Sarma Afarin Co. (SRMA +18.69). Both TRIR and COMB experienced higher prices after some changes to the composition of their Board of Directors. However, there has not been any public news regarding Sarma Afarin, the manufacturer of air conditioning units. In the Metallic Ore sector, the three companies with the highest market capitalization upgraded their projected net income for the financial year ending March 19, 2017. Golgohar Mining & Industrial Co. (GOLG +9.31%) improved its earlier projected net income by 23% to IRR 6,540 billion (approx. USD 182 million). Similarly, Chadormalu Mining & Industrial Co. (CHML +1.95%) improved projected net income to IRR 6,122 billion (approx. USD 170 million), 24% higher than its previous projection. Metals & Mines Development Investment Company (MADN +3.27%) also added 19% to its projected net income by announcing it to be IRR 2,934 billion (approx. USD 66 million). However, the highest growth in the sector was witnessed by Bama Mining & Industrial Co. (BAMA 10.09%). The company released its unaudited 2Q financials on Wednesday, reporting IRR 180 billion (approx. USD 5 mil­lion) in net income, representing 93% of its full year forecast. Despite the promising week­ly performance of the Machinery & Equipment and Metallic Ore sectors, the weak perfor­mance of the Metallic Products sector had the most negative impact on the All-Share In­dex. The sector was dragged into negative territory mainly because of the fall in price of Machine Sazi Arak Co. (MARK -6.86%). MARK has lost 20% over the last two months. This negative trend started after the company made announcements about several con­tracts and amending its projected net income for the financial year ending Sep 22, 2017.
Machine Sazi Arak Co. had initially forecasted 217% growth in net profit to IRR 1,364 bil­lion (approx. USD 38 million) but subsequent announcements were not taken well by in­vestors.

Reviewing the market from a technical perspective, the recent small gains on the All-Share Index have driven it over the main index’s 50 day EMA by 1% for the first time since late August. Now the index needs to pass over the resistance at 78,500. Indicators are not showing a considerable growth potential at the moment. The minor support is at 77,000 while the stronger one is expected to be at 76,000.

The TSE30 index, the index of the top 30 largest companies by market capitalization, add­ed 0.5% to close at 3,173. The TSE30 index has increased by 2.7% in the last four weeks, outperforming the rest of the market. Golgohar Mining & Industrial Co. (GOLG +9.31%) was the top gainer in the top 30 stocks, while SAIPA Group (SIPA -3.19%) experienced the greatest decline.

This week the Average Daily Trade Volume (ADTV) of the TSE dropped by 10% to USD 59 million. However, if there had not been USD 112 million of trade in Mashhad Municipal­ity Participation Bonds, the ADTV figure would have been lower.  During the third trading week of October, Asan Pardakht Co. (APPE +9.11%), SAIPA Group (SIPA -3.19%) and Azarab Industries Co. (AZAB -3.17%) were the shares with the highest traded value, re­cording USD 23.6 million, USD 12.6 million and USD 9.6 million worth of trades respec­tively. Asan Pardakht Co., the e-payment company went public on Monday.

On the Iran Fara Bourse (IFB), the overall index continued to climb albeit at a lower pace, adding 0.1% to close at 824. The Average Daily Trade Volume of the IFB fell by 58% to USD 54 million. Debt securities were the most popular instrument on the IFB, although their total traded value declined by 56% to reach USD 148 million.

In the FX market, the official USD Dollar rate was increased by 0.2% as the CBI quoted it at IRR 31,687. However, in the free market there wasn’t any significant change and it closed at 35,883. The CBI reduced the official rate of the Euro by 0.2% to IRR 34,764. EURIRR’s free market rate reached 39,726, 0.9% lower than last week. British Pound Sterling’s official rate was announced at 38,942 by the CBI, a 1.1% increase. The free market rate of GBP dropped further, losing 2% to IRR 44,300.

Written by Ali Karbalaee and Radman Rabii