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Foreign Investment in Iran Securities Up 140% Post-Sanctions

Analyst at Securities & Exchange Organization
Shapour Mohammadi (R), the new head of Iran’s Securities and Exchange Organization, addresses a press conference at SEO’s headquarters in Tehran on Saturday.Shapour Mohammadi (R), the new head of Iran’s Securities and Exchange Organization, addresses a press conference at SEO’s headquarters in Tehran on Saturday.
A majority of foreign investors in Iran’s securities market are from Germany and German-speaking countries

Foreign investments in domestic securities market have increased 140% since the implementation of the nuclear deal to stand at 11,700 billion rials (about $329 million at market exchange rates).

The statement was made by Shapour Mohammadi, the new head of Iran’s Securities and Exchange Organization, at SEO’s headquarters in Tehran on Saturday.  Mohammadi added that a majority of investors are from Germany and German-speaking countries.

Sanctions against the Islamic Republic were removed on January 16 (Implementation Day) following a landmark deal the country signed with world powers in July 2015, based on which it agreed to limit the scope of its nuclear program.      

Earlier, the Central Securities Depository of Iran reported that it issued 61 trading codes for foreigners to trade in the equity market in the first five months of the current Iranian year (March 20-August 21), which showed an 86% rise compared with last year’s corresponding period. He added that 24 codes were issued during the fifth month of the current fiscal year (July 22-August 21) alone.

Investors from the US, the UK, Spain, Russia, Germany, Sweden, Switzerland, Uzbekistan, China, the Netherlands, India, Turkey, Lebanon, South Africa, Japan, Cyprus, Italy, the UAE, Norway, Greece, Indonesia, Poland, Qatar, Iraq, Pakistan, Syria, Luxemburg, Kuwait, New Zealand, Malaysia, South Korea and Afghanistan currently have stakes in Iran’s equity markets.

“We are in negotiations with different parties to benefit from international technologies when it comes to trading and post-trading systems, while depending on local expertise to develop our very own platforms”, Mohammadi said.

He added that new financial instruments, including option contracts, will become functional by the yearend.

“The SEO has already issued a license for a joint venture between an Iranian and a foreign credit rating agency. We are also receiving and processing other applicants’ requests,” he said.

Iran’s bond market is expanding rapidly and needs to soak up money. The SEO hopes providing credit ratings on Iranian debt will put foreign investors’ doubts to rest.

Credit-rating agencies assess the creditworthiness of bond issuers-companies or, as in this case, countries that borrow money by issuing bonds. The ratings are given to large-scale borrowers and indicate to buyers of this debt how likely it is to be paid back.

Iran’s market regulator is also implementing International Financial Reporting Standards in select Iranian companies as a first step to mandating their usage by Iranian businesses.

“Twenty companies with consolidated financial statements have been obliged to provide their reports for the new fiscal year based on IFRS,” Mohammadi said.

Laws and standards can change from country to country. IFRS are designed to mitigate these differences by forming a common global language for business affairs so that company accounts are understandable and comparable across international boundaries.

IFRS is a single set of accounting standards, developed and maintained by the International Accounting Standards Board with the intention of applying those standards on a globally consistent basis—by developed, emerging and developing economies—thus providing investors and other users of financial statements with the ability to compare the financial performance of publicly-listed companies on a like-for-like basis with their international peers.

Adopting IFRS could lead to dual listings for Iranian companies in other exchanges and also for foreign companies on Iranian exchanges.

Mohammadi, who served as deputy minister of economic affairs and finance, took over SEO’s leadership on July 26 after Mohammad Fetanat-Fard resigned from the top post citing poor health.

Fetanat-Fard has been appointed an advisor to Economy Minister Ali Tayyebnia.

Financialtribune.com