With the subscription deadline set by the government’s bank-based exchange-traded fund ending on May 21, the Ministry of Economy announced that more than 58.86 trillion rials ($345 million) were generated via subscription of ETF units.
More than 3.481 million people subscribed for the initial phase that lasted for three weeks, according to a notice on the ministry’s news portal shada.ir.
The ETF, dubbed as the “First Financial Intermediary” offered government shares in three banks and two insurance companies.
ETF is a basket of securities that trade on an exchange, just like a stock. ETFs can contain all types of investments including stocks, commodities, or bonds.
The government’s bank-based ETF holds 17% stocks in Tejarat Bank, 17% in Bank Mellat, 18.32% in Bank Saderat Iran, 17.34% in Alborz Insurance Company and 11.44% in Amin Reinsurance Company.
The ETF failed to meet the set targets by the Economy Ministry both in the terms of number of investors interested in the subscription and the investment it attracted.
The government had xpected to make 170 trillion rials ($1 billion) by selling the ETF units and presumed that at least 8 million people would show up.
However, the ministry said the bank-based ETF is now the biggest ETF in Iran both in terms of investment value and number of investors.
As per a report from the Central Securities Depository of Iran, the overall value of exchange-traded funds in Iran’s stock market reached 190.6 trillion rials ($1.11 billion) on Nov. 21 of last year.
The government-initiated ETF alone accounts for 30% of the total value of ETFs in the domestic capital market, putting the number of ETFs to 43.
Offering government shares via ETFs is a government move to divest its assets in several companies, downsize and reduce its footprint in the state-dominated economy.
Spreading Awareness
“The scheme is to help introduce the capital market to the public as the most appropriate, transparent and productive venue for investment,” the ministry said.
“It has created an opportunity for the general public to invest in shares of large companies and profit from the capital market growth.”
There are two other ETFs for auto, refineries and metal companies in later stages. As per a timeline announced by the government, in the next stage government stakes in four refineries will be offered on June 21.
The shares will include a 20% stake in Tehran Oil Refining Company, Isfahan Oil Refinery, Tabriz Oil Refinery Company and Bandar Abbas Oil Refining Company.
Third phase of the program in the second half of current fiscal year (Sept 22) will include shares in giant auto and metal companies.
In the latter case the fund is expected to hold 12.05% of government stakes in the National Iranian Copper Industry Company, 17.2% in Mobarakeh Steel Company, 14.04% in Iran Khodro (IKCO) and 23% in SAIPA.
Beside the trading platform in the brokerage companies, the economy ministry has singled out 14 banks to facilitate the investment in ETF units for the ordinary people who lack trading codes.
As per rules, having a trading code is not obligatory in the subscription stage and the general public can buy ETF units using national IDs as trading codes. However, they must have a trading code in the later stages to be able to sell their ETFs in the stock market.
The government plan for boosting investment in state-controlled ETFs is premised on encouraging people to get involved. Incentives include up to 20% discount on prices. No age limit is set for buyers and those interested can purchase a maximum of 20 million rials ($125) worth of ETFs.
