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Wed 15 Jul 2015 03:43 PM

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Revealed: Iran's top firms likely to see up to $1bn of inward flows

Analysts predict foreign investors will take a 'bullish' stance after this week’s nuclear deal with Iran

Revealed: Iran's top firms likely to see up to $1bn of inward flows
(AFP/Getty Images)

Iran’s top 30 companies are likely to see up to $1 billion of investment the year after sanctions are lifted, according to analysts.

A report by Renaissance Capital states Iran is the “largest and most important economy that is still closed to institutional investors”.

But, as sanctions are lifted along with restrictions on foreign involvement following Tuesday’s historic deal, inward flows will rise as foreign investors take a “bullish” stance.

The report said: “The $95 billion market capitalisation of the stock market is larger than five of the markets [on the MSCI Emerging Markets Index], and all MCSI frontier markets.

“With roughly $100 million daily turnover and no Iranian restrictions on foreign involvement, portfolio flows could be significant as early as 2016.

“We expect $1 billion of inflows to equities within a year of sanctions ending.”

Iran could be open to investors as early as 2016, it said – “we expect a strongly bullish stance from foreign investors”.

The internet and e-commerce sectors are likely to be among the most attractive areas for international investors.

The report said Iran’s internet population is low at around 35 percent, but it is also one of the fastest growing in the world and could soon match Turkey’s 48 percent.

Retail is another high-growth industry sector, meaning e-commerce has significant potential. “Unlike in many emerging markets, logistics infrastructure is good and electronic payment systems are relatively well developed,” the report said, highlighting local e-tailer Digikala, which has 85 percent market share.

Other companies will buy into various Turkish stocks that have operational exposure in the region.

Bassel Khatoun, chief investment officer, MENA equity, at Franklin Templeton Investments (ME), pointed out that Iran’s 80 million population and young demography (64 percent of the population is below the age of 35) creates a strong backdrop for economic growth.  

He said: “The population is well educated with over 4 million university students, over half of whom are women. Iran also possesses massive natural resource wealth with combined oil and gas reserves that are among the largest in the world. 

“This creates investment opportunities across both consumer-oriented businesses as well as commodity-focused names. 

“Moreover, it is estimated that Iran requires over $1 trillion in reinvestment, which will bring with it significant construction related opportunities.”

Khatoun noted that Iran’s circa-$400 billion economy is operating well below its potential because of the numerous economic and political shocks the country has suffered over the past decade.

This week’s agreement should help to support “a gradual revival in Iran’s economy and make for compelling equity investment opportunities should a change in the sanctions regime allow foreigners to readily access the equity market and repatriate capital freely,” he said.

Meanwhile, Renaissance Capital envisages two possible responses from Iran to increased investor interest. On one side, a conservative camp may be prepared to accept foreign direct investment into the energy sector to improve Iran’s strategic self-sufficiency but be resistant to more change, a little like Putin’s Russia over 2012-2015, the report said.

On the other, a liberal camp might use foreign investor pressure to push through social and economic reforms and recapitalise and own parts of the banking sector, like Turkey in 2002-2007.

It also predicts Iran’s oil exports will rise by 0.8 million barrels per day (b/d) to 2.4 million b/d in 2016, following this week’s deal. As a result, the European Union’s share of Iran’s exports will rebound from 2 percent in 2014 to the 17 percent seen in 2011 before oil exports were sanctioned.

Revealed: Iran’s top 30 companies

   
     

Khalij Fars Petrochemical Company

Petrochemicals

$9.726m

Telecommunications Company of Iran

Telecoms

$4.801m

Mobile Communications of Iran

Telecoms

$4.778m

Tamin Petroleum & Petrochemical Investment

Petrochemicals

$4.011m

Mobarakeh Steel

Metals and Mining

$3.871m

Ghadir Investment

Financial Services

$3.820m

Parsian Oil & Gas

Petrochemicals

$3.534m

Mellat Bank

Banks

$3.375m

Iran National Copper Industries

Metals and Mining

$3.370m

Pasargad Bank

Banks

$2.937m

Bandar Abbas Oil Refining

Petrochemicals

$2.896m

MAPNA

Construction

$2.860m

Omid Investment

Financial Services

$2.611m

Gol-E-Gohar

Metals and Mining

$2.525m

IRI Marine Company

Transportation

$2.339m

Chadormalu

Metals and Mining

$2.245m

Saderat Bank

Banks

$1.983m

Pardis Petr.

Petrochemicals

$1.836m

Metals & Mines Development Holding

Metals and Mining

$1.451m

Khouz. Steel

Metals and Mining

$1.390m

Isfahan Oil Refining Company

Petrochemicals

$1.335m

Civil Pension Fund Investment Company

Financial Services

$1.327m

Bank Melli Inv.

Financial Services

$1.322m

Parsian Bank

Financial Services

$1.310m

Iran Khodro

Automobiles

$1.295m

Khark Petr.

Petrochemicals

$1.276m

Inf. Services

IT

$1.194m

Behran Oil

Petrochemicals

$983m

Saipa

Automobiles

$972m

EN Bank

Financial Services

$888m

Source:
Tehran Stock Exchange

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