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Corporate Earnings Slashed as Foreigners Rush in

Corporate  Earnings Slashed as  Foreigners  Rush inCorporate  Earnings Slashed as  Foreigners  Rush in

Corporate earnings will continue to fall this year, putting further downward pressure on Iranian equities that are in a two-year bear market, chief executive of Tehran Stock Exchange said earlier this week.

Earnings in the first half of this Iranian year (started March 21) came 45 trillion rials ($1.25 billion at market exchange rate) short of last year’s performance, as tightened fiscal spending due to a record loss of oil revenues, falling commodity prices, contractionary monetary policies enacted by the central bank to stem inflation and the general recession in the Iranian economy hit business performance.

“Considering the performance of listed companies during the past two quarters, if underlying economic factors remain unchanged, third and fourth quarter earnings reports will not break their trend,” Hassan Qalibaf-Asl was quoted as saying by Mellat Bazar.

According to the executive, 214 TSE companies announced 360 trillion rials ($10 billion) in earnings for the 2015-16 fiscal year, but only covered 105 trillion rials ($2.91 billion) in the first six months of the year. Their earnings reached 150 trillion rials ($4.16 billion) during the same period of last year.

The drop in earnings has weighed on TSE’s performance heavily. Its main index TEDPIX is now nearly 30% lower than its all-time high of 89,500.60 in January 2014. The benchmark edged up 0.02% to 62,734.60 points by Wednesday’s close.

In the slumping market, the number of initial public offerings has also stalled.

“We hope to see a pickup in IPOs with the stabilization of the market,” he said.

Qalibaf-Asl said Fajr Petrochemicals and Mellat Leasing are likely to offer their shares before the end of March and legal proceedings for their IPOs have been completed.

“Their shares will be offered based on market conditions and the view of their majority stakeholders,” he said.

 

Foreigners’ Securities Trading on the Rise

foreign investors are showing interest in Iranian equities. Like many observers, they are betting that the prospective lifting of sanctions against Iran’s nuclear program will spur economic growth.

According to Qalibaf-Asl, 180 foreign investors have visited the exchange so far this year.  

“With the removal of limitations on transferring money, we will see a considerable number of foreign investors enter various economic sectors, including capital markets,” he said.

After 12 years of dispute, Iran struck a deal with the West on July 14, which will lead to the removal of sanctions in exchange for a cutback on its nuclear program. However, the rush toward Iran has already started. The Central Securities Depository of Iran issued 15 new trading codes for foreign nationals in Aban—the Iranian month ending November 21—bringing the total number of such issues so far this year to 148.

Last year, only 121 foreign investors had received trading codes. CSDI is in charge of registration, custody and transfer of securities ownership, as well as their clearing and settlement.

Of the 15 investors that received trading codes in Aban, six were from Afghanistan, Britain, Cyprus, Germany and Italy. The rest were institutional investors. Their induction brings the number of foreign institutional investors in Iran to 47.

So far, 485 trading codes have been issued for foreign investors, 269 of them in the past two fiscal years.

Qalibaf-Asl also said the Securities and Exchange Organization is forming a committee to revise capital market regulations and TSE is working with the organization on this.

“The reality is that a decade has passed since the writing of securities’ regulations and it is high time for changes in some aspects,” he said.

The exchange is also looking to upgrade its trading software, which is needed, especially for introducing new financial instruments.

Financialtribune.com