Economy, Business And Markets

Top UK Investment Firm: Iran Too Big to Ignore

Top UK Investment Firm: Iran Too Big to IgnoreTop UK Investment Firm: Iran Too Big to Ignore

Investment opportunities in Iran are “too big to ignore”, the CEO of a top British investment firm told American broadcaster CNBC.

“With sanctions lifted, investors are about to gain access to a middle-income country with a highly educated and cheap labor force, and a population topping 80 million,” Clemente Capello, the founder and CEO of frontier and emerging market investment management firm Sturgeon Capital, explained.

“I mean the opportunities are huge. Iran is too big to ignore,” Capello said.

“But those opportunities extend beyond big business tie-ups.”

Capello, who has developed Sturgeon Capital’s Iranian fund, says Iranian equities are going for cheap, at a price to earnings ratio (P/E) of about five, where most mainstream market stocks are bought at 15 to 20 times P/E. Similarly, dividend yields are totaling around 15%, compared to 3-4% in established markets.

While the country’s 25% deposit rate has muted local stock demand, that’s all about to change.

“It’s what everyone is ignoring; this is the single biggest catalyst,” he said.

Interest rates are expected about to fall by a “massive 10%” over the next 18 months, Capello said, and will be a key driver to valuation. “Capital costs will drop and earnings will rise as credit becomes cheaper and more readily accessible.”

But like any frontier or emerging market, Capello said investors need to be wary of value traps and make sure that stockholders are aligned with investors.

“(There) are lots of large conglomerates who don’t really care about the share price,” he warned.