Foreign financial service companies are spearheading the trend to buy into Iran's economy and profit from the last frontier market that is expected to open up to foreigners soon.
Sanctions against Iran's economy are expected to be removed in early 2016, as Tehran limits its nuclear energy program.
The first place to invest is more liquid securities like stocks and government and corporate bonds, Bloomberg reported.
Turkish brokerage and advisory firm Unlu Yatirim Holding AS is targeting Iran for its first expansion outside its home market, as the impending removal of trade sanctions on the Islamic Republic presents opportunities to investors.
The Istanbul-based firm plans to offer brokerage services in Iran and start the first hedge fund in Turkey that invests in Iranian fixed income and stocks in 2016, according to chairman Mahmut Unlu.
"The fund, which has already received approval from the capital markets regulator in Ankara, may have an initial size of around $50 million, which could increase depending on subscriptions," he said.
Iran's two main securities exchanges are hovering near two-year lows, dragged down by sanctions, recession, inflation and currency devaluation. However, the removal of sanctions coupled with policy shift toward a more open economy is expected to jumpstart the Iranian economy. Thus, Iranian equities provide a long-term opportunity for gains, albeit relative to their risk.
Stock values have plummeted, providing a good opportunity to buy undervalued yet relatively solid companies.
“We are very hopeful, based on information from Iranian officials and international nuclear monitors, that sanctions will start to be removed from late January or February at the latest, if everything goes as planned,” Unlu said.
Turkey has for long acted as a gateway between Iran and Europe. The two countries have had years of cooperation and trade.
Unlu is banking on this experience and its proximity to Iran for its success.
Iran is preparing to rebuild its economy after years of sanctions. The Persian Gulf nation presented 60 projects valued at $70 billion to potential investors earlier this month to increase oil and petrochemical production and exports.
"Unlu Yatirim is in talks with an Iranian brokerage for a joint venture and will soon begin to provide equity research for listed Iranian companies for its international clients," Unlu said.
"If the venture talks fail, Unlu has permission from Iranian authorities to establish a brokerage by itself."
The firm helped ink $2 billion of merger and acquisition deals involving Turkish companies in 2015, or about a sixth of the transactions that the country’s advisory firms worked on.
Unlu said the firm has been hired by a consumer-goods retailer in Turkey to find acquisition targets in Iran, without being more specific.
In 2016, the firm expects to advise on a larger deal value than it did this year, he added.
British, French, German, Russian and Italian financial service companies are also preparing to invest in Iranian equities. Iranian authorities are overhauling tax, import, export, investment and ownership regulations to make it easier for foreigners to invest in Iran.
