Iran Weekly Market Report - April 15, 2016

The Tehran Stock Market witnessed lower prices for the second week in a row. The TSE All-Share Index fell by 1.4%, closing at 79,588. It is the first time the TSE’s benchmark has closed below the 80,000 mark in a month. The majority of stocks had weak perfor­mances this week, while the sector with the highest weekly traded values, Automotive (-8.4%) and Banking (-2.4%), had negative performances. The Non-Metallic Ore sector had the largest weekly increase by adding 4.2%, while the next top performer has been the Engineering Services sector by recording a 3.7% growth. Both sectors had only one share leading the whole sector. Ardakan Industrial Ceramics Co. (ARDK +20%) has been the market leader in the Non-Metallic Ore sector. ARDK reopened on Wednesday April 6, 2016, after 21 months of being closed. The SEO had closed the ticker because of non-disclosure of information about major shareholders’ trades and also a questionable trans­fer of debt to the company. In the Engineering Services sector, the market leader has been Mapna Group (MAPN +4.5%). In general, the major sectors poor returns resulted in the weakest weekly performance in 2016.

Under a technical analysis perspective, the All-Share Index not only didn’t surpass 81,500, as the minor resistance level, but also dropped below 80,000. The next minor support stands at 78,200, though the turn in the trend to continue an upward move is still expected. At the moment, the All-Share Index’s value has lost its advantage to the 50 day EMA, as their difference has narrowed to almost zero. The TSE main index’s perfor­mance in the current week can determine the market future in the medium-term. If the index drops below 78,200, a new pattern in the market may emerge, which might result in fluctuation between 76,500 to 81,500 for the whole of 2Q 2016.
The index of the thirty largest companies by market capitalization, the TSE30 index, fell at a slower pace this week by closing at 3,314, 1.5% lower than the previous week. The TSE30 index experienced slight negative daily changes during the week, reaching the lowest measure since March 6, 2016. Jam Petrochemical Co. (PJMZ +4.56%) had the highest performance in the top 30, while the weakest was Bandar Abbas Oil Refining Co. (PNBA -8.34%).

Also, the Average Daily Trade Volume (ADTV) dropped by 5.7% in reaching USD 98 mil­lion. Since the beginning of the new Iranian Calendar year, the market trade volume has been weak on average. The daily trade volumes since the beginning of the new Iranian Calendar Year (March 20, 2016) have been USD 93 million, while the average since Jan­uary 2016 has been USD 143 million. This week, the shares with the highest weekly trad­ed value were Mellat Bank (BMLT 1.7%), Iran Khodro (IKCO -11.3%) and Electricity Me­ter Manufacturing Co. (CONT -7.6%) by recording USD 43.3, USD 42.7 and USD 24.7 million worth of trades.

In the currency market, the Central Bank of Iran increased the official rate of US Dollar by 0.1%, announcing it as IRR 30,290. The free market rate of USDIRR reached 34,695, 0.4% lower than the previous week. The official rate of Euro had a deeper drop, as the CBI reduced it by 1.1% to IRR 34,130. However the free market rate of EURIRR in­creased by 0.6%, reaching 39,759. CBI also, quoted the official rate of the British Pound Sterling at IRR 42,863, 0.3% higher than the previous year. GBPIRR’s free market rate stood at 49,200 on Thursday, 0.1% lower than last week.

This week, Tehran hosted the Italian Prime Minster, Matteo Renzi, leading a delegation with 250 members. The outcome of this two day trip was the increased economic ties between two countries that have entered a new phase for the first time since the sanc­tions were implemented in 2012. Italy will provide almost EUR 5 billion worth of credit lines for the infrastructure projects of Iranian state owned firms. According to the reports, Italy’s export credit agency will guarantee the credit line up to EUR 4 billion for the com­panies developing Iran’s railways and motorways. Also, EUR 800 million would be provid­ed to facilitate the Italian SME companies’ business with Iran, according to a Financial Times report. The agreement between the two countries will support the Iranian govern­ment in executing its construction plans in the current Iranian Calendar Year, ending on March 20, 2017. Hassan Rouhani’s government initially intended EUR 17 billion for the construction projects in the offered budget plan to the parliament. Moreover, allowing for a credit line of almost EUR 5 billion, will assist with the reconnection of banking networks between Iranian banks and their European counterparts. However, the US financial sys­tem will stay closed to Iran, according to the US Treasury Secretary, Jacob Lew. This has somewhat impeded the reconnection of Iranian banks to international banking networks and also having transactions in US Dollar currency. The economic agreements with Italy can potentially reduce the negative impact of America’s attitude on this front, opening the locks for Iranian banks to reconnect with European banking system. Some experts have pointed out about the difficulty of re-establishing networks with Tier1 international banks, due to US sanctions. But some news centers have also covered the Italian Prime Minis­ter’s statements about the possibility of UniCredit bank’s future presence in Iran.