In the first half of 2018, Iran’s stock market has been influenced by some important factors as well as political issues such as: collapse of Rial against U.S. Dollar, new governor for the central bank of Iran, imposing sanctions on Iran as result of U.S. withdrawal from JCPOA, fluctuation in commodities’ prices in international markets due to the fact that commodity plays a pivotal role in Iran’s capital market. In this article, current condition of Iran’s capital market has been discussed briefly.
Mostly, Iran’s capital market has reacted positively to the aforementioned factors during the last 6 months.
To start with, the following diagram depicts TEDPIX (Tehran Dividend and Price Index) upward trend which started in 12th Jun 2018 and in fact, it was the first time that TEDPIX experienced the channel of 100,000 thanks to depreciation of Rial. But remarkable jump occurred in 28th July 2018 when Valiollah Seif, ex-governor of CBI, replaced by Abdolnaser Hemmati. According to new exchange rate policies, CBI launched a secondary market for foreign exchange to compensate foreign exchanges` shortage in the market. The index of Iran’s capital market surged mainly because the main portion of Iran’s capital market has been dedicated to basic metals and petrochemical that their products have been priced by Dollar. Due to the new foreign exchanges package, commodity-based companies are able to sell their products according to secondary market dollar exchange rate which is fairer and is around double of predefined previous rate. Unfortunately, concurrent with re-imposing sanctions, the market did not continue its strong uptrend due to fear of investors and they sold off their stocks. All in all, profit margin of companies is expected to experience higher rates that makes all to gain more earning per share in Rial term although it is possible that some of them experience lower sales amount because of difficulties caused by sanction in selling their products to foreign customers and lower domestic demand as a result of lower economic growth. Some of the companies such as Kama (BAMA1) and Bafgh(BAFG1) will face more gain because they are owners of their mines and they don’t need to pay royalty patent and as a result, their profit margin will increase more. Some of them such as Chadormalu)CHML1( and GolGohar(GOLG1) will experience high profit margin too but not as much as BAMA1 and BAFG1 as they are obliged to pay royalty patent which we explained it in detail in the article about “Royalty Patent in Iran”.
In conclusion, it is true that industries which are consumer of base metals and petrochemical materials, will be damaged by increment in their raw materials prices, but the majority of Iran’s industries are raw material producers. Therefore, a rise in selling price of such companies whether it stems from a hike in price of commodities in global markets or increment USD/IRR, can influence their profits vehemently. As a result, it could be reasonable to expect the market back to its uptrend and TEDPIX touches higher levels in the near future.