Tehran Bourse, Not Bitcoin, Is Iran’s Hedge against US Sanctions

October 4, 2019 11:26 UTC

More and more Iranians are parking their savings into the Tehran bourse as staggering inflation weakens their trust in the Rial.

Tehran Times reports that the benchmark Tehran Stock Exchange (TSE) grew 74% during the first six months of the Iranian calendar, which begins every March 21. The performance made TSE one of the best performers in the global equity market. It showed how domestic investors sought refuge in the bourse against a weakening local currency.

Tehran Stock Exchange (TSE) is acting as a hedge against local inflation. | Source: TSE

The top-30 companies listed on TSE engulfs more than 60% of the exchange’s market capitalization. These firms include exporters from copper, steel and the petrochemical industry, which means they generate incomes in foreign currencies. That protects their investors from a sluggish domestic economy, which – as IMF said in August – is on the verge of getting crippled by the ongoing U.S. sanctions.

On September 22, TSE’s main index TEDPIX closed to its all-time high of 302,103 points against the rial, its best in fifteen years. At the same time, the index almost doubled against the U.S. dollar. The move uphill brought the bourse closer to highs last seen in 2014 – when Tehran had entered a nuclear accord with the Barack Obama administration.

“Iran’s bourse showed it can hedge against foreign currency risks and is the best market to guarantee people’s money with high dividends,” a Tehran-based asset manager told FT on a request of anonymity.

No Foreign Funding

Meanwhile, foreign funding into the TSE dwindled from over $100 million in 2009 to little below $50 million in 2019. Analysts say that foreign investors actively reinvested their dividends into Iran’s stock markets because of sanctions, which do not allow them to take money out of the country. That, combined with domestic investments, made Iranian equities an ideal hedge against a 43% inflation rate.

“There are almost no new foreign portfolio investments in the bourse since Mr. Trump swept to power,” a local fund manager said. “Iran’s capital market is for investors who have the stamina, rather than those who see skyrocketing figures and dream of quick money.”

Tehran Times reports that TSE, alongside the IFB, Iran Mercantile Exchange (IME), and Iran Energy Exchange (IRENEX), could preserve their gains for the rest of the Iranian year (ending March 20 next year). They reasoned it with the first-day performance of TEDPIX. The index rose by a staggering 9,367 points on September 22. Meanwhile, trade volume on the TSE and IFB touched 32 trillion rials, which is about $761.9 million at the currency exchange rate.

“It shows that some huge liquidity is moving toward the stock market,” the agency wrote. “The power of this liquidity will probably bring new records for this market in the second half.”

This article was edited by Sam Bourgi.

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Posted in: Market News
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