Economy, Business And Markets

Iranian Stocks Outperform Global Majors

Iranian Stocks  Outperform Global MajorsIranian Stocks  Outperform Global Majors

Iran started the new calendar year of 1395 on March 20, which was dominated by the long Norouz holiday.

Iranian stocks were enslaved to the fate of economic sanctions against Iran during the previous year that ended on March 19, 2016. And the sanctions created a break in stock performance in Tehran, compared to equities in global markets.

Equities rallied and fell on rumors and developments in negotiations between Tehran and P5+1—Britain, France, the United States, Russia and China, plus Germany. Finally, the implementation of the deal reached by the negotiators in mid-January created an unprecedented bull run.

This is not to say falling commodity prices and a slowdown in global growth did not affect Iran. Not to mention the effect of the ongoing crisis in Iran’s banking system, among other sectors, or the $13 billion hole in government finances last year. But throughout all of that, the nuclear deal remained the focal point of stock movements during the year.

Iran’s main equity market, Tehran Stock Exchange, had a downward trend for much of the year. The $101 billion market’s main index, TEDPIX, rallied 35% off two-year lows in January after sanctions were revoked and finished last year 28.3% higher.

The smaller petrochemical-heavy Iran Fara Bourse over-the-counter market lagged behind the TSE in performance but its moves were correlated with the larger exchange. Its benchmark IFX finished the last Iranian year 18% higher with a $17 billion market capitalization, official data show.

Adjusted in dollar for the dollar’s 1.7% climb against the rial from 33,950 rials to 34,550 rials, TSE and IFB’s returns dropped to 26.6% and 15.3% respectively. Buoyed by the Federal Reserve tightening monetary policy for the first time in nearly a decade, the dollar index fell nearly 3% from 97.9 to 95 points. Mirroring that performance, the euro eased some 4%, falling from $1.08 to about $1.12.

How did developed markets compare to Iran’s exotic stocks? The Shanghai Composite is 18.5% lower after a year of tumultuous swings. Japan’s Nikkei is down 18.3%, but thanks to a stable yen, it is only 11% lower in dollar terms on the year.

Europe’s benchmarks did poorly this year in local currency terms, with Italy’s FTSE MIB down 19.7%, but only lower by 15.7% in US dollar terms given the euro’s strength. Germany’s DAX fell 17.3% during the Iranian year while France’s CAC 40 declined 12.2% in euro terms.

The commodity rout hammered London’s FTSE 100, down 11.8% on the year. In contrast, the domestically focused FTSE 250 is down just 1%.

In the US, the S&P 500 declined 2.8% for the year, its worst showing since the financial crisis in 2008 when it dropped by nearly 40%. The S&P was weighed down by significant falls in the oil and materials sectors while the technology-heavy Nasdaq Composite dropped nearly 4.6%.

Slowing demand from China and supply gluts hit the sector hard in the last Iranian year with oil sliding nearly a third. Brent crude tumbled 25% over the year from $55.32 to below $41.2 a barrel from March 21, 2015, to March 19, 2016. Spot gold rose 6%, with copper falling 17%.

In the Middle East, Borsa Istanbul 100 Index edged up 0.5%, while the Dubai Financial Market General Index lost 2.5% for the 12-month period. Saudi Arabia’s Tadawul All-Share TASI Index was the worst performer in our survey, dipping 30% due to pressure from falling oil prices.