Iran Weekly Market Report - 07/01/2016

Share prices on the Tehran Stock Exchange experienced increases for the second week in a row. The TSE All-Share Index gained 1.5% as it closed at 62,632 on Wednesday’s trading session. The TSE experienced its best performance for the last eleven weeks. After recording slight changes for several days, the TEDPIX had dramatic positive changes on Tuesday and Wednesday by adding 1.46%. This positive performance by the TSE has been in contrast to weak performances of global stock markets, as well as further declines in crude oil prices. Most of the major sectors on the Tehran Stock Exchange had promising performances and the majority of them closed in the green. Among the main sectors, the Automotive group was the best performing industry by adding 8.3%. Also, Oil Products and Chemicals sectors gained 3.5% and 1.2% respectively. However, Metallic Ores and Base Metals sectors were exceptions as their indices declined by 1.4% and 7.1% each. The interesting point about this week’s growth in the Tehran Stock Exchange was the broad positive records of various types of stocks in different sectors.

Studying the All-Share Index through Technical Analysis perspective shows that the dra¬matic growth during the last two days has already put the index above its 50 day EMA by almost 1%. Also, the change in direction by the index has been supported by the volume indicators due to expanding levels of trade volume in recent days. TEDPIX’s chart shows readiness to post signals to achieve higher measures, but first it needs to surpass its closest resistance level of 63,000.

Moreover, the index of the thirty largest companies by market capitalization, the TSE30 index, also recorded a positive performance of 1.8%, to close at 2,628. The TSE30 index regained its position above the 2,600 level after three weeks, due to its strong move in the first week of January. Among the listed shares under the TSE30 index, Iran Khodro (IKCO) had the highest gain by adding 8.9% to its share value, closing at IRR 1,701 (approx. USD 4.6 cents).

Also, the Average Daily Trade Volume (ADTV) of the market reached USD 99 million this week, recording a surge of 229%. The ADTV figure was particularly higher this week, partially due to a block trade worth more than USD 377 million over Bandar Abbas Oil Refining Co. (PNBA) on Saturday. Otherwise, the ADTV would have stood at USD 44 million, which is still 46% higher than last week. Meanwhile, the shares with the highest traded values were Azarab Industries Co. (AZAB +9.2%), Iran Trasnfo Co. (TRNS +25%) and Mellat Bank (BMLT +0.5) by recording USD 13.8, USD 6.5 and USD 6.0 million worth of trades respectively.

Moreover, the FX market witnessed slight changes in the rates of foreign currencies. The Central Bank of Iran (CBI) increased the official US Dollar rate by 0.1% to IRR 30,158, while the free market USDIRR rate reached 36,692, which is 0.5% higher than the previ¬ous week. However, the Euro experienced a different trend as its official rate was set at IRR 32,625, 0.9% lower than the previous week. Similarly the free market rate of EU¬RIRR declined by 0.9% being quoted at 40,151 by exchange bureaus. The British Pound Sterling posted higher declines as the CBI reduced its official rate by 1.2% to IRR 44,118. Meanwhile, the free market rate of GBPIRR slipped by 0.5% to reach 54,300.

Furthermore, the Iranian Customs Administration (ICA) released its initial overview of the non-oil trade balance of Iran, reporting for the first nine months of the current Iranian Cal¬endar Year (March 21 –December 20, 2015). The ICA report shows that Iran has export¬ed USD 32.3 billion worth of goods during this period, which is 11% lower than last year’s figure. On the other hand, Iran has imported USD 30.1 billion according to the ICA. This figure is also 22% lower than the same period in the last year. By comparing the data on a monthly basis, it is evident that exports have increased by 9% since November, while imports have grown by 10%. In total, the foreign trade volume of the country is standing at USD 62.2 billion during the nine months ending on December 20, 2015, while the trade balance shows a surplus of USD 1.8 billion. The main imported items have been corn feedstock (3.5%), wheat (2.9%) and soybean (1.9%), whereas, Iran’s main exports have been petrochemical products and gas condensates. The ICA, in its announcement, has not disclosed the exact amount of exported petrochemical products and gas conden¬sates. Additionally, the top three export destinations of Iran have been China (USD 5 bil¬lion), Iraq (USD 4.3 billion) and the UAE (USD 3.7 billion). While Iran’s imports have mostly come from China (USD 7.6 billion), UAE (USD 5.7 billion), South Korea (USD 2.7 billion) and Turkey (USD 2.2 billion).

Regarding the recent tension between Iran and Saudi Arabia, we reviewed Iran’s foreign trade volume with Saudi Arabia and some of its regional allies (Bahrain, Djibouti, Soma¬lia, and Sudan) who have decided to cut their diplomatic ties with Tehran. Iran’s total ex¬ports to the above mentioned countries has been USD 239 million, which is 1% of the country’s total exports in the first nine months of the Iranian Calendar Year. However, the figure for imports is even lower, as it is reported at USD 121 million (0.4% of Iran’s total imports) for the same period. It is important to note that the UAE has not cut its diplomatic relations with Iran as the country enjoys large levels of trade with its northern neighbor. The UAE has been an important trade partner for Iran during the past few years as it has acted as a channel for transferring goods to and from Iran during the time of the sanctions. It remains to be seen whether levels of trade between the two countries would be affected by the removal of sanctions, expected in the very near future.