Economy, Business And Markets

Specialist Funds Jump-Start on Iranian Stocks

Specialist Funds Jump-Start on Iranian StocksSpecialist Funds Jump-Start on Iranian Stocks

Two decades after he hauled a suitcase full of cash onto the floor of the Moscow Stock Exchange to buy up shares in the aftermath of communism, Dominic Bokor-Ingram has taken a similar early punt on Iran.

The Briton launched a joint venture fund with Iranian investment group Turquoise Partners last week, just one day after the announcement that most international sanctions on Iran would be lifted in return for restrictions on Tehran’s nuclear program, Reuters reported.

He was not alone. Clemente Cappello, CEO of London-based Sturgeon Capital, bought the first stocks for his new Iran fund in December.

He used internal money and complex transfers that will no longer be needed as Iran rejoins the international financial transactions system SWIFT, but hopes to start buying shares for European investors next month.

Well ahead of the pack, the two men will have to wait a while before major portfolio investors plough money into a market still fraught with risk.

Both said having a strong local partner was key.

“Investor relations is not very well developed,” said Cappello, who works with a local brokerage and has hired a Farsi-speaking equity analyst, adding only some of the financial data were in English, while annual reports and analyses were published in Farsi.

Small non-US investment funds are less encumbered by the few remaining sanctions and more flexible to deal with tangled stock ownership structures than large portfolio investors.

  Diverse Offering

Those who are invested are keen to play up its advantages.

“The opportunity you get in Iran doesn’t appear anywhere else–the other markets that are opening up like Myanmar, Cuba or Ethiopia, they don’t even have stock exchanges,” said Bokor-Ingram, of Charlemagne Capital, who started travelling to Iran two years ago to check out investment prospects.

The 80-million-strong country is classified as middle-income with a well educated population and has an annual output of some $400 billion—larger than established frontier countries such as Thailand or South Africa.

The bourse has diverse listings, thanks to a broad industrial base unusual among its regional oil exporting peers whose stock markets are dominated by energy, petrochemical and financial listings.

The headline numbers are enticing. More than 600 companies are listed on two stock exchanges, Tehran Stock Exchange and Iran Fara Bourse small-cap market, according to Sturgeon Capital.

Bokor-Ingram’s joint venture fund holds around $50 million of 18 Tehran-listed stocks.

TSE’s market cap stood at 2,873,072 billion Iranian rials ($97 billion at the official exchange rate) while daily volumes over the past few days was around 2,000 billion rials, according to the bourse’s web site.

For some, progress has been slower than anticipated.

“It is going to be a while before that big institutional money will come in,” predicts Bokor-Ingram.

Until then, the next big momentum is likely to come from investors inside the country rather than outside.

Iran will have access to billions of dollars of its frozen assets overseas of which some, once repatriated, will end up in shares. And interest rates, well above 20% to curtail inflation bloated by sanctions, are set to come down, freeing capital that could find its way into local stocks.