NEWS
ECONOMY   Investment  

Foreign Investment Trickles Into Iran’s Capital Market

Total capitalization of Iran's capital market, including equity and fixed-income, is currently standing at around $130 billion.

The amount of foreign investment in the country, including direct and portfolio investment, is reported to have been quadrupled since the implementation of the landmark nuclear deal known as the Joint Comprehensive Plan of Action in mid January 2016. 

Still, the figure comprises less than half a percent of the total market capitalization. The percentage does not include the amount invested in Iranian mutual funds. 

The share of foreign investment is, admittedly, meager considering the size of Iranian markets and economy compared to some neighboring countries like Turkey where 90% of the market are owned by foreign investors.

Many associate the problem with lack of connections between Iranian banks and their foreign counterparts. Legal issues related to sanctions imposed against Iran are not blocking the connection but it is the pure result of foreign banks’ business strategy, for which they claim Iran’s business volume is not worth the US frown.

Technically speaking, the problem with Iran's capital market stems from lack of custodianship services. 

“The subject of international banks acting as custodian in Iran was being followed up before 2010 when many international banks had active presence in Iran but it required multilateral contractual relationship between Central Securities Depository of Iran and Iranian and foreign banks,” said Ramin Rabiee, chairman of the Board of Directors at Turquoise Brokerage Co. and the founder of first offshore equity fund focused on Iran, in an interview with SENA. 

There are about 10 big international banks with custodian services, out of which at least seven are American, so no international custodian in Iran is expected for the foreseeable future.

Rabiee went on to say that when it comes to attraction of foreign investment, there are several shortcomings like absence of custodianship, harmonized rules and regulations as well as poor compliance, which are not expected to be resolved in the short run. 

Consequently, foreigners are reluctant to set up a portfolio of securities in Iran, except for small quantities, transferred through non-banking channels, many of which are retail investors. This inevitably imposes money laundering and compliance concerns. It takes a long time to see big international funds adding Iran to their portfolios.

Even so, there are strategic investors who opt to buy the management shares of listed companies to secure voting seats and are planning for a long-term presence in Iran’s industrial sectors. 

A handful of foreign entities with huge stakes in listed companies from the chemical sector make up more than 90% of foreign investment in Iran's capital market. 

Even in the case of Turkey, foreigners act mainly as strategic investors and do not trade frequently. 

The 90% foreign investment in Turkey comprises only 10% of their total trade value. 

“We need to focus and facilitate the presence of foreign parties interested in taking over local companies but it requires decisive decision making on the part of our officials. There are numerous cases where buyers and their money are ready, but it seems no one on the other side of the table is making the final call,” Rabiee concluded.

Comments:

Leave a Comment:

   
   
   
 

Iran's FM Contradicts EU/E3 Claim of Upholding JCPOA Commitments

Iran's Foreign Minister Mohammad Javad Zarif reacted to a joint statement issued by France, Germany, Britain and the European Union on Tehran’s new step to further suspend its nuclear commitments under the 2015 nuclear deal, known as the Joint Comprehensive plan of Action (JCPOA).
 

Iran to Reach A Major Security Goal by Staying in JCPOA: Rouhani

Iranian President Hassan Rouhani said the country plans to remain in the 2015 nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), arguing that by staying in the agreement the Islamic Republic will reach a major “security” goal next year.
 

Europe Doing Nothing to Save JCPOA: Iranian MP

Chairman of the Iranian Parliament’s National Security and Foreign Policy Commission Mojtaba Zonnour said the European parties to the 2015 nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), are doing nothing to save the accord.
 

IAEA to Verify Uranium Enrichment at Iran’s Fordow: Official

Inspectors from the International Atomic Energy Agency (IAEA) are going to verify the resumption of nuclear enrichment at Iran’s Fordow nuclear site on Sunday, the spokesman for the Atomic Energy Organization of Iran (AEOI) said.
 

Iran’s 4th Nuclear Step in Line with JCPOA: FM Zarif

Iran’s recent move to further suspend its nuclear commitments following European parties’ failure to honor their obligations fit within the country’s rights under paragraph 36 of the 2015 nuclear between Tehran and world powers.
 

EU says remains committed to nuclear deal

Maja Kocijancic, a spokeswoman for the European Commission, said on Monday that the European Union remains committed to 2015 nuclear deal, officially known as the JCPOA.
Upcoming Events
Publications
 Mines & Metals

Mine & Business Today

 Scrap & Recycling

Ahangan

Our partners