Economy, Business And Markets

Iran Equity Market Heading Toward Globalization

Iran Equity Market Heading Toward GlobalizationIran Equity Market Heading Toward Globalization

The Central Securities Depository of Iran (CSDI) is gearing up to provide essential infrastructure to help globalize Iran's equity market, SENA reported.

Iran's equity market has been off the chart for foreign investors, and hence the CSDI has a pivotal role in preparing the infrastructure through interaction with foreign equity markets and outlining strategic plans to lure the fund managers to Iran's untouched market.

"Enticing foreign investors is one of the most effective strategies to increase liquidity," SENA quoted CSDI's head, Hamed Soltani-Nejad as saying. "To achieve this, measures have been taken to help foreign investors inject capital into Iran's equity market," he added.

> New Silk Road

The CSDI has been in negotiations with China Central Depository and Clearing Company and Japan's Securities Clearing Corporation with the aim of reinvigorating Iran's equity market via the "New Silk Road," according to Soltani-Nejad.

He noted that central securities depositories, particularly in the south-eastern Asian countries, are striving to prepare the required infrastructure to link their equity markets to the international markets.

In September 2013, China’s President, Xi Jinping outlined plans to reinvigorate the ancient Silk Road with a modern network of high-speed rail, motorways, pipelines, ports and fiber-optic cables stretching across the region. The economic highway he envisages follows three routes: one running from central China through Central Asia and the Middle East, a maritime route extending from the southern coast, and a third branching out from Yunnan, the Economist reported.

Electronic Trade Top Priority

To reinvigorate the equity market and help the investors and brokerage firms to enjoy tailor-made services, the CSDI is planning to introduce post-trade processing to facilitate investing in the stock market, Soltani-Nejad noted.

Clearing and settlement services are being offered at both Iran Farabourse (or over-the-counter) and Energy Exchange, said Soltani-Nejad, adding: "Within the post-trade services, clearing and settlement services will also be provided at the Iran Mercantile Exchange, which is expected to curb the unnecessary financial transactions considerably."

Iran-Korea Collaboration

Soltani-Nejad further said that based on a mutual agreement, the CSDI has set up a taskforce with the South Korean securities depository for exchange of technical knowledge and experience aimed at linking Iran's and South Korea's capital markets.

The most complicated procedure in the international equity markets is post-trade processing, where the buyer and the seller compare trade details, approve the transaction, change records of ownership and arrange for the transfer of securities and cash. Post-trade processing is especially important in markets that are not standardized such as the over-the-counter (OTC) market, and the responsibility is with the Central Securities Depositories.

Linking Iran's capital market to that of Korea can pave the way for the individual and institutional investors to shore up their portfolios with shares from the respective countries.

Booming Market and TSE Trade

Since the framework nuclear agreement was reached between Iran and the P5+1 countries earlier this month, the Tehran Stock Exchange (TSE) has been enticing fund managers from across the world, who are determined to dig in one of the world's most attractive emerging markets.

The TSE soared more than 12 percent following the agreement, however, the deal is presumed to be tentative due to misunderstandings about the circumstances of lifting the sanctions[imposed against Iran by the West over its nuclear program], which weighed on the benchmark to wipe out almost 4 percent.

Despite lingering ambiguities, investors are piling up in big numbers to garner undervalued shares in the hope to obtain considerable gains once the sanctions are lifted.