* Tehran bourse up 330% since begin of the 12 months
* Vitality shares leap on oil value bets
* However inflation, capital controls additionally behind positive aspects
By Bozorgmehr Sharafedin and Karin Strohecker
LONDON, Aug 26 (Reuters) – The coronavirus disaster, an oil value shock and crippling U.S. sanctions on Iran’s power and banking sectors have introduced the nation’s economic system to its knees. But the Tehran Inventory Trade is house to one of many high performing fairness indexes on the planet.
Iran’s benchmark TSE index (TEDPIX) has soared 330% because the begin of the 12 months in native foreign money phrases due to a wide ranging rally in oil corporations, refineries and the petrochemical trade – accounting for greater than a 3rd of the highest 30 corporations.
The steep ascent, nonetheless, could have little to do with confidence within the nation’s future. As an alternative, it mirrors occasions in Venezuela and Zimbabwe, the place indexes have surged greater than 400% in native phrases amid rising inflation and capital controls.
“Inventory market positive aspects in Iran shouldn’t be considered as a sign of financial stabilisation, however moderately a mirrored image of hyperinflation and trapped capital, extra akin to Zimbabwe than Russia or Saudi Arabia,” stated Hasnain Malik, head of fairness analysis at Tellimer.
“Native wealth is in search of a refuge to protect a few of their capital,” he added.
The lion’s share of the positive aspects comes from power corporations – the principle supply of overseas alternate income for the nation, placing the sector in a stronger place in comparison with others.
The Isfahan Oil Refining Firm has roared 500% larger because the begin of the 12 months, whereas Tehran Oil Refining Firm is up 450% and Bandar Abbas Oil Refining Firm up 250%.
The trajectory of Iran’s oil shares appears out of line with worldwide counterparts, with refiners in Asia and North America completely closing their processing crops as a consequence of unsure prospects for a restoration in gas demand.
The share costs of U.S. refiners Marathon Petroleum Corp and HollyFrontier have halved because the begin of the 12 months.
This summer time, Tehran deliberate to promote a few of its shares in refineries together with Isfahan Refinery, Tehran Refinery and Bandar Abbas Refinery. Nonetheless, a delay as a consequence of disagreements amongst ministries has brought about the shares to retreat from their file highs within the final two weeks.
“The federal government doesn’t need to promote its shares low-cost,” stated Arash Safari, a dealer at TSE.
By promoting a part of its shares, the federal government seeks to lift funds to curb a ballooning funds deficit as a consequence of oil sanctions.
Many merchants invested their cash within the refineries and petrochemicals corporations, betting oil exports will rebound in the future and oil costs will improve. Some have been punting on oil costs – which fell some 30% this 12 months and are at present hovering at $45 per barrel – to bounce again to $70 within the coming months.
“The refineries with extra publicity to exports benefited probably the most from the rise within the inventory market and the depreciation of the rial,” stated an oil and merchandise dealer on situation of anonymity.
An advanced net of restrictions and sanctions has made Iran’s inventory market nearly solely a enjoying discipline for native buyers. In the meantime, rising value pressures have spurred extra retail buyers to plough money into shares.
“Inflation, or to be extra precise anticipated inflation, is the principle issue for the rise of the index of the Tehran Inventory Trade,” a TSE spokesperson informed Reuters.
“Luckily or sadly, Iran’s economic system has lengthy confronted financial sanctions which intensified in recent times – this has restricted the influence of the worldwide economic system on the Iranian economic system,” the TSE added.
Inflation stood at 27% in July, in line with Iran’s official statistics. The Worldwide Financial Fund predicts it might exceed 34% over the 12 months. Iran’s rial foreign money has weakened 70% in opposition to the greenback since Jan. 1.
“Numerous capital that’s flowing into the inventory alternate is cash that in any other case would have been leaving Iran, however now is definitely a harder time for Iranians to seek out methods to take their capital overseas,” stated Esfandyar Batmanghelidj, founding father of Bourse & Bazaar, a suppose tank targeted on Iran’s economic system.
Clerical rulers additionally inspired unusual Iranians to put money into native shares to spice up the nation’s economic system.
Whereas analysts and merchants warn of a bubble that might burst, President Hassan Rouhani referred to as the unprecedented rally an indication of financial resilience in opposition to the U.S. sanctions.
“They’re all offended and say that the inventory market is in turmoil everywhere in the world,” Rouhani stated in April. “Why is the Iranian inventory market rising? Iran’s inventory market is nice due to the efforts of all corporations and financial activists.”
Reporting by Bozorgmehr Sharafedin and Karin Strohecker;
Enhancing by Mark Potter