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Iran: Market Overview - May 2007

Source: Iran Investment Monthly, Turquoise Partners


The recessionary environment of the Tehran Stock Exchange, triggered by massive IPOs that had exhausted the already weak market, continued in the month of May. The monthly trade volume for May has been one of the lowest ever recorded for this month at $520 million, almost one third of the volume of May 2004. Different sectors demonstrated unsystematic and unexpected fluctuations during the month and no particular sector experienced an overall stable and well-performing month. Some of the more significant sectors are analyzed in more detail below:


Zinc: The news coming from the country’s largest zinc mine, Angouran, continues to have a negative impact on listed zinc companies that have experienced significant sell-off queues during May. Some sections of the mine had collapsed in late 2006 and there is still no accurate estimation of when the problem will be fully fixed. In addition, the government has showed unwillingness to grant private sector companies operational rights in the mine. One of the listed companies, Tose’ Maden Rouy, was operating on the mine from 2001-2006.However, after expiration of the permit in 2006, the government decided not to renew the permit and instead commission the operation of the mine to a Ministry of Industries and Mines affiliated company.


Automotive: Some of the automotive and parts manufacturing companies had their AGMs during this month but even their elevated dividend yields (in excess of 20%) could not help this sector to recover from the recession of the past few months. The share price of these companies fell significantly following their AGMs and some of them were trading at PE ratios of less than two which is a record low for this sector. Rationing of gasoline consumption, saturation of the market, and high debt ratios are the main reasons behind the downfall of the automotive sector.


Banking: The news of interest rate cuts of over 4% for the privately owned banks which will be imposed by the government resulted in huge sell offs of the three listed privately owned banks. Analysts believe that the interest rate cut will not have a direct impact on the earnings of these banks in the long term.  However in the view of some observers, the news of the government’s imposition of a lower interest rate for private banks may increase economic uncertainty and dampen investors’ confidence.


Real Estate & Construction: This sector was one of the most stable sectors in the market during the month of May. Although the sector did not experience significant growth, the support of investors and market-makers during short-lived sell offs resulted in little fluctuation for this sector. Lower risk and the ever increasing value of the asset base of these companies is a reason behind investor confidence in this sector.


Petrochemicals: Although international prices of petrochemical goods have risen in recent weeks, the sector has been volatile with a falling trend for share prices due to some uncertainty over domestic policies. The government and the parliament approved a bill last year which enforced market value pricing of the raw material for petrochemical complexes. Until now, the raw material was sold to these companies at a subsidised discounted rate. If implemented, this decision could significantly decrease the earnings of these listed companies. Although the decision has not been implemented yet, it is expected to materialize within the next few months. This makes investors nervous about their holding in these companies which has resulted in large sell off orders.


Overall the month of May saw a recessionary market with trade volumes falling by around 10% compared to April and the market indices, TEPIX and TEDPIX, dropped by 4.8 and 3.5 percent respectively. The performance of the TSE indices during May is demonstrated below:




About Turquoise: Turquoise is a boutique investment bank based in Iran with offices in Tehran and London. Turquoise publishes Iran Investment Monthly with the aim of keeping its recipients updated on the latest macroeconomic developments in Iran, providing an in-depth analysis of the Tehran Stock Exchange as well as introducing new financial products and private equity opportunities to potential investors. For more information please visit:

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