Value of Bank-Based ETF Doubles

EghtesadOnline: Trade in exchange-traded fund that holds government shares in three banks and two insurance companies commenced on Saturday.

News ID: ۷۵۰۳۲۶

28 June 2020

The value of each ETF unit doubled in one month after its subscription closed in mid-May, said Abbas Memarnejad, the deputy economy minister for banking, insurance, and state-owned companies affairs.

The units of the bank-based ETF, known as the ‘First Financial Intermediary’ will be traded like other ETFs, according to a notice published on the Tehran Stock Exchange website.

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 bank-based ETF holds 17% of government stake 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 government had given buyers until May 20 to subscribe for the ETFs. Buyers were barred from trading units on the stock market within a month after the subscription time expired.

As per the framework, having a trading code was not obligatory in the subscription stage and the general public could also buy ETF units using national IDs as trading codes. However, they must have a trading code if they intend to sell their ETF units in the stock market.

Applicants and buyers were allowed to buy maximum 20 million rials ($105) worth of ETF units.

Considering a 20% discount, the closing price of each ETF unit was 100,000 rials, which has now increased to 232,000 rials thanks to the booming stock market

With the subscription deadline ending on May 21, the Ministry of Economy announced that over 58.86 trillion rials ($305 million) was generated from ETF units with more than 3.48 million people taking part, making it the biggest ETF in Iran both in terms of value and number of investors.

However, the ETF failed to meet targets set by the Economy Ministry both in the terms of number of investors and the amount it attracted.

The government had expected to make 170 trillion rials ($890 million) by selling the ETF units and that at least 8 million people would show up.

Divestiture Scheme

Offering government shares via ETFs is in line with efforts to cede the government shares in several companies.

As per a set timeline, in the next stage government stakes in four refineries will be up for sale.

The shares will include a 20% stake in Tehran Oil Refining Company, Isfahan Oil Refinery and Tabriz Oil Refinery Company.

Shares in giant auto and metal companies will be offered in the third phase of the divestiture program.

The fund reportedly holds 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.