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:

   
   
   
 

JCPOA Joint Commission meeting scheduled for July 28: Iran Foreign Ministry

Iran's Foreign Ministry spokesman says an urgent meeting of the Joint Commission on the implementation of the Iran nuclear deal will be held at the level of political deputies and directors in the Austrian capital city of Vienna in late July.
 

Iran’s Rial Gains Significant Value against US Dollar

The Iranian national currency of rial is 118,000 against the US dollar which shows a relatively high regain of value compared to months of low that followed American introduction of crippling economic sanctions against Tehran.
 

US ‘Shot Itself in Foot’ by Abandoning JCPOA: Iran’s FM

The US “shot itself in the foot” by pulling out of the 2015 nuclear deal between Tehran and world powers, Foreign Minister Javad Zarif said.
 

France's Macron to Speak to Rouhani, Putin, Trump to Ease Tensions

French President Emmanuel Macron said he would speak to Iranian President Hassan Rouhani, Russian President Vladimir Putin and US President Donald Trump this week as part of a French initiative to reduce tensions between Tehran and Washington.
 

Returning of Iran to JCPOA very easy: Jahangiri

Iranian First-Vice President Es’haq Jahangiri said only a few hours would be enough for Iran to return to its commitments within the Joint Comprehensive Plan of Action (JCPOA), but European sides should ask U.S. to lift sanctions instead of calling Iran to stay committed to the deal.
 

Other Parties Have Started Efforts to Save JCPOA: Iran

Iranian Foreign Ministry Spokesman Seyed Abbas Mousavi said following the country’s moves to reduce commitments under the 2015 nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), the other parties have started efforts to save the accord.
Upcoming Events
Publications
 Mines & Metals

Mine & Business Today

 Scrap & Recycling

Ahangan

Our partners