Economy, Business And Markets

TSE Benchmark Records Biggest Rally Ever

TSE Benchmark Records Biggest Rally Ever TSE Benchmark Records Biggest Rally Ever

The Tehran Stock Exchange (TSE)' breathtaking rallies at Saturday close helped all indices to record unprecedented gains, with the TEDPIX soaring 3.19 percent to underscore TSE's hidden potential.

According to TSE data, the TSE gauge surged 2,099 points or 3.19 percent to end at 67,827. The first market index pulled up 1,497.8 points or 3.12 percent to stand at 49,492.6. The second market index rose 4,443.8 points or 3.37 percent to settle at 136,475.8. The free float index gained 2,438.3 points or 3.21 percent to 78,505. The industry index climbed 1,755.3 points or 3.25 percent to 55,714, and the blue-chip index was also up 110.4 points or 3.61 percent to finish at 3,167.9.

As was expected, both individual and institutional investors lined up from early morning to grab the opportunity of garnering shares that have hit rock bottom values since last year, with leading sectors, namely banking, auto, telecommunication, and petrochemical especially drew attentions.

More than 388 million shares changed hands, with the majority of savvy shareholders retaining their portfolio with the aim of gaining more in coming days or months as institutional investors preferred to keep tight to their shares which resulted in a low trade volume on Saturday. Trade value settled at more than 1.24 trillion rials.

Another record high at the TSE went to daily market cap, which exceeded $92 million due to the tangible growth in share values.

Persian Gulf Petrochemical Industry Company (PGPIC) – which has the highest market cap among all listed companies – with almost 232 points, had the most positive contribution to the TEDPIX. Mobile Telecommunication Company of Iran and Telecommunication Company of Iran followed the PGPIC, and with close to 114 and 113 points took the second and third place respectively.

> Main Triggers

Iran nuclear talks have eventually yielded a milestone agreement, which highlights a prosperous atmosphere for the whole economy in the mid and long run. As the sanctions are set to melt down, it is expected that Iran's frozen assets will be released, and the gates will open for foreign investors to step into one of the most attractive emerging markets across the world.

Furthermore, with the lifting of sanctions Iranian companies can reestablish their business interactions with foreign companies, and allocation of L/C to traders can boost trade between Iran and other countries. All in all, numerous economic opportunities await foreign direct investment. The petrochemical sector could be an immediate in the post-sanctions era.

Besides savvy investors inside the country, fund managers across the globe are gearing up to embark on pouring money in various sectors, and through different approaches. As market analysts recommend, mergers and acquisitions (M&A), and the Iranian equity market are the best choices for investors. Our bottom-up analysis indicates that acquisition is more frequent in Iran.

Iran has one of the highest oil and gas reserves in the world, but overall its economy is not nearly as dependent on oil and gas as its peers in the Middle East, the Financial Times reported.

Charles Robertson, chief economist at the investment bank Renaissance Capital believes that Iran is, surprisingly, the most diversified economy in the world — it exports every item in the IMF classification of exports, adding that “its agricultural and manufacturing base may be more competitive if energy prices are low and the currency therefore is relatively cheap.”

When it comes to the stock market, lowest price earnings (P/E), shares below their nominal prices, block offerings, Initial Public Offerings (IPOs), and the bright prospect of the economy in the mid-run could smoothly entice investors to shift to one of the highest yielding stock markets.

Iran launched a privatization program a decade ago that has, albeit fitfully, moved share ownership from companies directly controlled by the government into the hands of Iranian pension funds. Those pension funds are also controlled by government entities—leaving the bulk of the market still under government sway – a concern for some potential investors. But financial companies wooing future western dollars argue that those funds are ultimately motivated by returns and likely to sell off poor performing shares in the coming years. Large western institutional investors would be ideal buyers for these blocks of shares, the Wall Street Journal reported.

To conclude, the ongoing bullish sentiment is expected to be reinvigorated once the sanctions are lifted, which is expected to happen within the next three months. The TSE seems to be on the right track to unleash its potential, while lagging indicators are heralding spectacular opportunities in the near future.