Equities climbed to a four-month high by the week's close on Wednesday, in anticipation of the removal of international sanctions against Tehran's nuclear energy activities.
However, the ongoing slump in oil and weak fundamentals kept the market from unleashing its true potential.
After breaking an 11-day rally at the start of the week, shares on the Tehran Stock Exchange resumed their rise and led to the largest daily gain since July 13 on Wednesday. Investors were buying into the market ahead of International Atomic Energy Agency's report on Iran's nuclear program, Bloomberg reported.
Tehran Stock Exchange’s main index, TEDPIX, went up 1.08% before closing firmly above the 63,000 point mark at 63,516.90.
Despite all the record breaking, the rally has been weak. TEDPIX only rose 1.4% for the entire week, less than half a day's daily volatility cap set by the exchange.
Banks who stand to gain from reconnecting with global financial markets were some of the top gainers, lending credibility to the rally, which had started on rumors of deals between Iranian and foreign companies. Petrochemical producers that have been hammered by falling crude oil prices will get a respite, though it is uncertain if it will outweigh the boost they get from increased exports after sanctions relief.
The United Nations and world powers are close to lifting sanctions on Iran under a historic nuclear deal struck in July between Tehran and P5+1 (the United States, Britain, France, Russia and China, plus Germany), according to Reuters.
The United States and the European Union both took formal legal steps in October to lift sanctions on "Implementation Day"—the day Iran meets all conditions under the deal.
That is expected to happen in the next few days, Iranian and western officials said. The green light to sanctions removal will come via a report the IAEA will send to its governing board and the UN Security Council verifying Iran's compliance with its obligations under the deal.
"Either Saturday or Sunday will most likely be the Implementation Day," said Abbas Araqchi on Wednesday.
The lifting of sanctions is expected to bring dramatic changes to Iran's business environment. Together with the government's move away from a state-controlled economy, it will return Iran to growth. But the effect of sanctions relief will take at least six months to appear in corporate earnings.
Meanwhile, oil has fallen to 12-year lows, hurting Iran's petroleum dominated exports. Analysts expect most companies to revise down their expected earnings for the fourth quarter that ends on March 19.
> Weekly Stock Market Report
Tehran Stock Exchange’s all-share index TEDPIX rose 884 points or 1.4% during the week that ended January 13 compared to the previous trading week to settle at 63,516.
Close to 5.5 million shares valued at $299.5 million were traded in 349,000 transactions, indicating a 21% and 40% drop in weekly trade volume and value compared to the previous week respectively, with the number of transactions up 31%.
According to TSE data, the First Market Index added 666 points to stop at 43,663 and the Second Market Index gained 1,655 points to close at 143,482, filing a 1.55% and 1.17% growth compared to the preceding week respectively.
Close to 761,550 participation bonds worth $21.2 million changed hands, indicating a 260% and 259% surge compared to the previous week respectively.
The auto and auto parts manufacturing sector was the top weekly gainer accounting for 10.60% of all transactions, followed by paper products with 9.45%, metal products with 9.16%, financial intermediaries with 7.94%, transportation, storage and communication with 7.59%, and technical and engineering services with 7.36%.
Meanwhile, Iran Fara Bourse’s overall index IFX was up 9.3 points or 1.3% to reach 711 during the same week.
More than 1.6 billion securities valued at $207 million changed hands in 140,000 transactions, according to IFB.
Weekly trade volume and value registered a 10% and 19% rise compared to the previous trading week. IFB’s market cap rose $309.8 million or 1.4% to end at $22.3 billion.
Over 135 million shares valued at $12.7 million were traded in the First Market, indicating a 14% and 80% growth in weekly trade volume and value respectively. The Second Market witnessed the trading of 770 million shares valued at $53.2 million to record a 7% and 38% decline compared to the previous trading week respectively.
Saturday saw the highest trade volume of the week with 518 million shares changing hands, while Sunday witnessed the highest trade value of the week with the transaction of $60.7 million shares.
The insurance and pension group ranked first among weekly gainers, accounting for 15% of all transactions, followed by autos and auto parts manufacture and base metals with 13% and 10% respectively.
