As we mentioned in previous reports, Iran is the second largest economy in the middle east and north Africa(MENA) Region after Saudi Arabia, with an estimated gross Domestic Product(GDP) in 2014 of US 406 billion Dollar. Irans economy growth was about 3 percent in 2014 and it is estimated to decrease to 1.9 percent in 2015. If all the sanctions are being lifted by the beginning of 2016, real GDP could rise to 5.8 percent and 6.7 percent in 2016 and 2017. This means Iran has a great potential for economic growth in upcoming years. According to this, you can find many individual and institutional investors all around the world who are extremely willing to invest in Iran. However, an important question which any investor may face is: Does Iran have appropriate infrastructure in financial institutions and services for helping investors to find right assets and stocks to invest in?
There are many regulated financial institutions which can provide many services in Tehran Security Exchange. We will discuss about these financial institutes and their services below:
- Brokerage firms act as medium in the transaction, the brokerages lower the risk of both parties of transactions and provide transaction services as well. The broker could provide advice to the client. The supervisory entity could find assurance that all the regulations which have been ruled for the transactions are carefully followed. In addition, brokers usually have a guaranty fund and all brokers are its members. There are more than 107 active brokerage companies in Tehran Stock Exchange.
- The investment bank is a medium between securities issuer and public investors and is allowed to perform brokerage activities, act as a dealer, market maker, adviser, portfolio of securities, subscription, subscription undertaking and similar activities through receiving permit of the Security Exchange Organization(SEO).
- An investment adviser is a legal entity that provides the investors with consultation on purchase and sale of securities through a specific contract. The services have provided by advisors are: recommendation to purchase, sell or keeping securities, expressing views on the process of price or supply and demand of securities in future, Express views on the value (rate) of securities. There are 10 active investment advisories and 9 investment advisory licenses obtained by brokers in Tehran Stock Exchange.
- Portfolio manager is a legal entity that purchase and sells securities for investor in order to acquire profit within a specific framework. Portfolio management means deciding on purchase, sell or keeping securities in name of a certain investor by the portfolio manager in the framework of a specific contract for acquiring profit for the investor. Specific portfolio means the sum of assets of securities, fixed income assets and Sukuk. There are 7 asset management companies and 72 asset management licenses obtained by investment bank, investment advisors and brokers in Tehran Stock Exchange.
- The main activities of Financial Process institutes are data collection and information processing to decide on investment in securities. There are 5 active Financial data processing companies in Tehran Stock Exchange.
- Credit rating agencies rates debts securities of companies with respect to the non-repayment risk and bankruptcy. The operations of those agencies makes financial provision climate transparent and executable. The investors have no access to information in debt instruments and even if they have access to that information, there is lack of specialty and skills for analyzing it.
- It is the financial entity that invests the financial capital earned by publishing investment certificates in their approved activities and the owners share both the profit and loss according to their investment share in the fund. Moreover, there are 38 fixed income funds, 94 equity funds and 16 hybrid funds in Tehran Stock Exchange. These funds mostly managed by brokerage companies and their advisory teams.
With these financial institutions which providing services in Tehran Stock Exchange, foreign and domestic investors can find a bright path for investing in Iran capital market and according to this fact, investors can find brilliant investment opportunities by investing in Iran. However, there are some weakness in this market such as: lots of potential to developing English online trading, reporting financial statement according to IFRS, etc. As a result, the mentioned statement reveal that also there are many financial institutes and services in Iran but this sector requires investment in infrastructure like any other part of Irans economy.