Iran Weekly Market Report

For the first time in 2016, the Tehran Stock Exchange witnessed slight declines in its share prices on a weekly basis. The TSE All-Share Index slipped by 0.06% this week, closing at 77,840. The market benchmark’s fast growth started to slow a fortnight ago, adding just 0.5% last week. Lower pace growth in the previous week has continued as 0.84% was lost in the first two trading sessions of this week and just recovered by the end of the week. Weak performances by leading sectors in the market have inhibited growth. Last week, the Oil Products sector’s 7.5% drop hindered further gains on the main index. However, this sector had the highest growth this week with 11.1%. The two other leading sectors, Automotive (-0.1%) and Metallic Products (+1.1%) had poor re­turns in the fourth week of February. Banking (-1.0%), the sector with second largest trade volume, continued to move minimally for the second week, recording a negative performance. Bandar Abbas Oil Refinery Co. (PNBA +12.1%) and Esfahan Oil Refinery (PNES +11.0%) pulled the Oil Products sector down last week, but were the top positive movers on the sector’s index this week. The majority of banking shares had limited week­ly changes with a slight tendency to negative returns. Also Azarab Industries Co. (AZAB -7.0%) had the highest negative effect on Metallic Products sector. Iran Khodro (IKCO +0.3%) and SAIPA Group (SIPA +5.9%), the main shares in the Automotive sector, did not follow their recent solid gains this week.

Looking at the TSE’s main index performance from a technical analysis perspective, cur­rent conditions suggest further potential for growth. However, the index is already in the range with limited fluctuations. The Money Flow Index indicator shows the All-Share In­dex has already left the overbought area and volume has declined slightly. The trend is still upward, with a gentler slope. The 50 day EMA is still lower than the index but the dif­ference has now declined to 8%. Chart analysis also confirms the possibility of lower pace growth under the 80,000 level. However, the index first needs to surpass a re­sistance level at 78,500.

The Average Daily Trade Volume (ADTV) of the market reached USD 181 million, 15% higher than last week. However, the trade volume was inflated by a block trade on SAIPA Group shares. SAIPA Investment Co. (SSAP +1.2%) bought 6% of SIPA’s shares for USD 105 million. Excluding this block trade, the weekly increase of ADTV would be only 2%. The shares with the highest daily traded values were SAIPA Group, Iran Khodro, and Mellat Bank (BMLT +3.7%), recording USD 75.8, USD 57.7 and USD 50.9 million respec­tively.

The FX market in Iran experienced a slight increase in the US Dollar rate. The Central Bank of Iran (CBI) added 0.02% to the official rate of USD, announcing it at IRR 30,192. The free market rate USDIRR rose by 0.2% to 34,716. The Euro went the other direction with the CBI announcing the official rate of Euro at IRR 33,290. Similarly, the free market rate of EURIRR declined by 1.1% to 38,718. The CBI reduced the official rate of British Sterling Pound the most, putting it at 42,091. This is 2.6% lower than the previous week. The free market rate of GBPIRR also recorded a 1.4% decline to 49,700.

The Central Bank of Iran released its monthly inflation report on Wednesday. The latest CBI report shows the Consumer Price Index in the eleventh month of the Iranian Calen­dar (January 21 – February 19, 2016) has increased by 0.2% (MoM). In the previous month’s report, MoM inflation had increased by 0.4%. The Year-over-Year change of the CPI indicates inflation has fallen once again, reaching 8.9%. YoY inflation was an­nounced at 9.6% in the previous month. This is the third month in a row that YoY inflation has been below 10%. On a monthly basis, the highest growth in inflation occurred in the Cultural Expenses & Leisure category, at 1%. Communication and Tobacco are the only categories with negative adjustments, both dropping by 0.1%. Similar to last month’s inflation report, Education and Health Care costs had the highest growth YoY. They have recorded 21.3% and 18.1% inflation respectively. Tobacco has recorded a negative YoY change of negative 1.1%.

The Central Bank of Iran also released its monthly housing market report for the city of Tehran on Thursday. The total number of home sales in the Iranian capital over the peri­od January 21 – February 19, 2016 (the eleventh month of the Iranian Calendar) was 16,434 units. This is 0.7% higher than the previous month and 5.6% more than this time last year. The average price of one square meter sold was USD 1,129, 1% above last month’s average price. The yearly comparison also shows 3% growth. In total 141,542 home sales were recorded during the first eleventh months of the current Iranian Calen­dar year (March 21, 2015 to February 19 2016). This is 10.5% lower than the same peri­od last year.

Furthermore, the two major automotive companies affected the whole market this week. Iran Khodro’s share price experienced a volatile week with an 8.57% decrease on Satur­day and Sunday, and then a 9.26% recovery in the following days. Last weekend, IKCO published its latest unaudited projections for the current financial year ending on March 19, 2016 and the next year. Iran Khodro has improved its projected net income by 33% to USD 23 million. The reason behind the increase in net income is the projected USD 43 million revenue from its subsidiaries. Meanwhile, the initial projected net income for the next financial year is announced at USD 24.5 million. SAIPA Group did not repeat its pre­vious weeks’ solid gains either. The ticker of Automotive sector’s number two producer has been off the trading board since Monday. The market regulator removed the ticker for further enquiries into the company’s latest projected net income. SIPA released its latest unaudited projections on Sunday, improving its net income for the current financial year from USD -88 million to USD 232 million. The company’s anticipation to collect USD 345 million revenue from its subsidiaries, has been the game changer.