Economy, Business And Markets

Foreign Investment Soars in Iran Securities Market

Business & Markets Desk
Foreign Investment Soars in Iran Securities MarketForeign Investment Soars in Iran Securities Market

More foreign investors are vying for Iranian securities that are considered a high yield, high risk investment option, since the removal of sanctions. 

The Central Securities Depository of Iran—the body in charge of handling securities—issued 24 new trading codes for foreign investors in Farvardin (the first month of the current Iranian year that ended on April 19). 

“The new additions bring the total number of foreign investors in Iranian securities to over 575,” Bourse Press quoted the managing director of CSDI, Mohammad Reza Mohseni, as saying.

Iran emerged from a decade of sanctions after last July’s signing of a deal with P5+1 group of countries—the United States, China, Britain, France and Russia, plus Germany—called the Joint Comprehensive Plan of Action. 

In exchange for Iran limiting the scope of its energy program, the deal agreed to suspend all nuclear-related sanctions imposed by the United Nations, United States and the European Union. The agreement was implemented in mid-January 2016.

With the prospect of normalization of relations with Iran, its securities markets have caught the interest of foreign investors. 

According to Mohseni, during Farvardin, foreign investors bought 100 billion rials ($2.8 million at current market exchange rate) worth of securities.

Of the 24 new trading codes issued by CDSI, 16 belong to investors from the United Kingdom, Poland, Russia, Austria, Greece, China, Iraq and Afghanistan. The remaining eight codes were given to foreign companies. 

According to Iran Fara Bourse’s CEO Amir Hamouni, bonds guaranteed by the government, especially Islamic Treasury Bills—22.5 trillion rials of which were sold last year—are the preferred vehicle of investment for foreign investors.

Stocks are less alluring as due diligence on a company would take eight to 12 months. Government guaranteed bonds have the advantage of being lower risk and easier to analyze, compared to equities, especially considering the lax Iranian financial reporting standards.

Other than their own predilections, foreign investors receive a trading code for buying into IFB’s portfolio of bonds and equities.

However, even equity trading by foreign investors is picking up. 

According to Tehran Stock Exchange’s chief executive, Hassan Qalibaf-Asl, foreign investors’ activity on the exchange has increased tenfold since the JCPOA was signed.

“Investors that fled the market returned after the implementation of JCPOA,” he said.

Qalibaf-Asl said foreign investment in TSE rose from 50 billion rials ($1.4 million at market exchange rate) to 500 billion rials ($14.4 million) after the implementation of the nuclear deal in January 2016.