Iranian Equity ETFs Lose Money in H1

EghtesadOnline: Investors have fled to bond markets and other safe haven assets, as poor economic prospects lowered appetite for stocks. The exodus also happened among mutual funds, where nearly 99% of their 948.7 trillion rials of assets ($26.6 billion at market exchange rates) are held as bonds.

News ID: ۷۳۷۱۴۸

25 September 2016

While bonds offer between 18% and 20% interest per annum and bank deposit rate for one-year term is 15%, few investments—including stocks—can match their risk and return profile.

Iran’s two equity markets were gloomy at best during the first half of the current Iranian year that started on March 20. Equities on both Tehran Stock Exchange and Iran Fara Bourse took hits during the first quarter, as corporate profits remained disappointing. However, both markets reversed their trends in the second quarter and recovered some of their earlier losses.

TSE’s main index lost 4.7% during the first half of the year while its smaller counterpart IFB edged up 1.3%, driven by gains in the petrochemical industry.

Consequently, Iran’s handful of exchange traded funds failed to generate returns for their investors in the first half of the current Iranian year.

The three largest equity ETFs had absolutely zero return in the first two quarters. Tose’e Andoukhte Ayande with 142 billion rials ($3.98 million) in assets, Kardan Investment Bank’s index tracking ETF with 141.8 billion ($3.97 million) and Turquoise Partners’ ETF, which tracks TSE’s top 30 companies and has 110.6 billion rials ($3.1 million) under management, all had no value change for the period.

Yet, these three were better off than last year’s star performer Amin Tadbirgaran Farda. The fund that had grown 26.2% last year sank just over 4% in the past six months.  Its assets have fallen from over 69 billion to 66 billion rials ($1.9 million to $1.8 million).

The two worst performers were Karizma asset management’s Sepehr Karizma ETF with 70 billion rials ($1.9 million) of assets under management that tumbled 6.53% and Hasti Bakhsh Agah with 75 billion rials ($2.1 million) in assets dipped 7.49%.

Conversely, Iran’s largest ETF, Etemad Afarin Parsian, unsurprisingly a bond-only fund with 4.9 trillion rials ($137.4 million) of assets, earned its investors 11.41% during the six-month term. The ETF made 21.1% last year.

Bearish sentiment is likely to continue for the next quarter, as no perceptible change is on the horizons. However, a surge in foreign investment could turn the tables for the Iranian economy.