Tehran Stocks Unshaken by US Nuclear Deal Pullout

EghtesadOnline: Iran nuclear deal seems to be on life-support these days, as the United States has unilaterally pulled out of the accord and other signatories are making frantic efforts to hold the deal together.

News ID: ۷۴۵۳۵۸

23 May 2018

That screams risk for the Iranian economy, evident in some foreign businesses' sudden disillusionment with Iran and announcements of halting operations in the country by the yearend.

Tehran stocks, however, seem to have taken it the other way round. The day after US President Donald Trump announced the pullout decision, stocks had a much muted reaction while most expected a freefall.

In fact, the US withdrawal served as a threshold for stocks to rebound, as ambiguities surrounding the fate of the deal, otherwise known as the Joint Comprehensive Plan of Action, had paralyzed trade since the current fiscal year began on March 21. In other words, Trump's decision to pull out of the nuclear deal cleared up the air, according to Financial Tribune.

Overall, Tehran Stock Exchange's main index TEDPIX shed 296.4 points or 0.31% during the month that ended on May 21 to close at 95,227.4. The index in fact recouped most losses incurred during the month's first half.

On the other hand, Iran Fara Bourse’s benchmark index IFX gained 43 points or 4% to stand at 1,107. IFX is now only about 7 points away from its all-time high reached in late March.

> Putting an End to Ambiguities

Markets started the second month of the year, Ordibehesht (April 21-May 21), with a lot on their plate.

For starters, they came into the month still dazed by the government's unified USD/IRR rate of 42,000 rials. Bureaux de change were out of the game, as the government barred them from trading and a black market came into play to defy mainstream analysis.

Simply put, all previous market forecasts fell by the wayside and lethargy ensued: demand and trade volume reached new lows, with indices bleeding every day. The unknown fate of JCPOA was not helping things either.

In contrast, the foreign exchange and gold markets were going wild. Unofficial rates were reaching up to 70,000 rials per USD and Bahar Azadi gold coin crossed the 20-million-rial mark.

Yet Trump's announcement to refuse to extend sanctions waiver on May 8 caused a dramatic shift in markets. Black market USD/IRR rate dropped to 63,000 rials and gold coin shed 1.2 million rials.

This is when stocks' upward trend also started. It is noteworthy that the equities' freefall expected from the US pullout had already taken place over the year's first month and a half.

TSE started the current fiscal year (March 21, 2018-19) at 96,425, and following a seesaw pattern, stood at 93,600 on May 8.

Sanctions are set to officially kick in as of August and November. Until then, market fundamentals seem able to support equities' growth.

And there seems to be hope on the horizons. The European Union announced on May 15 that they're working on a nine-point economic plan to keep the deal alive. Its highlights include focusing on continued sale of Iran's oil and gas products, continued transportation relations with Iran, effective banking transactions and further investment in the country.

The language is still dubious, but the rift between the US and EU on JCPOA is undeniable, and for Iran, highly promising.

> Gold Coin, Euro Keep Rising

Official USD rates stood officially where they were, but black market rates as well as other currencies and gold have continued to rise.

Euro was at the forefront for the month, with Bahar Azadi gold coin lagging behind.

The gold coin gained 5.35% last month to 18.7 million rials, according to Tehran Gold and Jewelry Union’s data.

The rial was quoted at 74,290 against euro by the month's close. It marked a 9.65% rise for the European currency for the month.

As for the unofficial USD/IRR rate, it grew 3.14% to 62,300 rials. Average trade stood at 60,410 rials for the month.

> Monthly Trade in Detail

Over 23.41 billion shares valued at $1.13 billion were traded on TSE during last month. The number of traded shares and trade value surged by 143% and 183% compared to the month before.

TSE’s First Market Index gained 197.1 points or 0.29% to end at 67,823.9. The Second Market Index also dropped by 2,773 points or 1.35% to close at 201.838.

And at IFB, over 5.9 billion securities valued at $1.02 billion were traded during the month.

IFB’s market cap gained $762 million or 2% to reach $36.52 billion.

Its First Market witnessed the trading of 369 million securities valued at $14.11 million and about 2.27 million securities valued at $121.7 million were traded in the Second Market.

Over 35 million debt securities valued at $736.5 million were also traded at IFB, up 100% and 79% in trade volume and value respectively.

Exchange-traded funds stood at 117 million worth $39.9 million, up 57% and 83%.

Housing mortgage rights’ trade grew 42% in trade volume and 25% in value to reach 633,848 securities worth $9.3 million.