Economy, Business And Markets

Risk Aversion Fades as Rial Rises on Nuclear Deal, Stocks Rally

Risk Aversion Fades as Rial Rises on Nuclear Deal, Stocks RallyRisk Aversion Fades as Rial Rises on Nuclear Deal, Stocks Rally

The rial rose against all major currencies on Saturday, as bullish bets on the Iranian economy increased on the promise of the lifting of the western sanctions against Iran’s economy.

Risk aversion faded from Iran’s financial markets as Iran and six world powers reached a framework accord on the 12-year nuclear dispute between Tehran and the West, leading to an unprecedented rally in Iran’s equity markets and the fall of the dollar.

The talks between Iran and the P5+1 – Britain, France, Germany, China, Russia and the United States – blew past a self-imposed March 31 deadline. But the exhausted negotiators reached a Joint Comprehensive Plan of Action (JCPOA) and left till June 30 to hash out the details of the final deal that would ensure the peaceful nature of Iran’s nuclear program.

Based on the JCPOA, all nuclear related sanctions against Iran will be removed as Iran’s commitments are verified by the International Atomic Energy Agency (IAEA). These sanctions include those imposed by the United States and European Union and all past resolutions set by the United Nations Security Council.

The US dollar sank 1.17 percent to 32,580 rials by 11:44 GMT on Saturday, a three-week low. The greenback briefly touched a seven-month low of 31,930 rials at 8:10 London time but then rose as low prices spurred more buying.

The euro also fell versus the Iranian currency. It was down 1.9 percent to 35,870 rials by mid-day in Tehran.

Sterling was the hardest hit, plunging nearly 3.87 percent to a 13-month low of 48,810 rials by 11:44 GMT on Ferdowsi Street – the heart of foreign exchange in Tehran.

Two of Iran’s neighbors also gave in to rial’s advances. The Emirati dirham dipped 1.89 percent to 9,420 rials, while the Turkish lira was down 2.13 percent to 13,250 rials in Iran’s foreign exchange market.

Benchmark bullion coin gave no quarter. The precious coin edged up 0.11 percent to 9,420,000 rials trailing gold’s gains in the international markets. Spot gold was up 0.36 percent to 1,206.91 an ounce on Saturday.

 Exceptional Day for Equities

Investors rejoiced as stocks had their best in the Tehran Stock Exchange’s 48 year history. TSE’s main index surged an unprecedented 3.19 percent to a four-month high of 67,827.00 points.

Iran’s over the counter market, Iran Farabourse, rose even more than the TSE. The IFX index rocketed 6.31 percent to 766.3 points by Sunday’s close, its highest since Jan. 5.

Industries most affected by sanctions were the main gainers of the JCPOA coming out of Switzerland, though no industry was left out of the party in Tehran’s stock markets.

Money managers are restructuring their portfolios to exploit the expected bull run in equities. Some already had extraordinary gains on Saturday. Exchange Traded Funds led the gains on Saturday while other mutual funds followed suit.

Two of the ETFs listed in Iran Farabourse outperformed the market. Amin Tadbirgaran Farda (ALMAS) beat the IFX by 3.74 percent. The equity ETF netted investors just over 10 percent for the day. Tose’e Andoukhte Ayandeh (ATLAS), a hybrid had a similar performance, Iran Farabourse data show.

Other equity ETFs also did well. Aseman Armani (ASAS), managed by Aseman Fund Management, increased the wealth of its investors by 6.01 percent, and Sepehr Charisma’s (KARIS) shares surged 5.58 percent only in six months.