Iran Capital Market Insight - August 2018 - Securities & Exchange ...
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Iran Capital Market Insight August 2018
Capital Market Indices
The end of month figure of Iran capital market major indices including the TSE's (TEDPIX) and
the IFB's total return index (IFX) is compared with that of the previous month in Table 1.
Table 1: Capital Market Indices
Index Aug July Change (%)
2018 2018
TEDPIX 136,911 108,831 25.8%
IFX 1,553 1,222 27.1%
The past year trend of the indices is illustrated in the following figure.
Figure 1: Major Indices
145,000 1,800
137,000 1,700
1,600
129,000
1,500
121,000
1,400
113,000
1,300
105,000
1,200
97,000
1,100
89,000
1,000
81,000 900
73,000 800
8/23/2017
8/31/2017
9/16/2017
9/24/2017
10/2/2017
11/3/2017
12/5/2017
1/14/2018
1/22/2018
1/30/2018
2/15/2018
2/23/2018
3/11/2018
3/19/2018
3/27/2018
4/12/2018
4/20/2018
4/28/2018
5/14/2018
5/22/2018
5/30/2018
6/15/2018
6/23/2018
7/17/2018
7/25/2018
8/10/2018
8/18/2018
10/10/2017
10/18/2017
10/26/2017
11/11/2017
11/19/2017
11/27/2017
12/13/2017
12/21/2017
12/29/2017
9/8/2017
1/6/2018
2/7/2018
3/3/2018
4/4/2018
5/6/2018
6/7/2018
7/1/2018
7/9/2018
8/2/2018
TEDPIX - (Left Axis) IFB - (Right Axis)
Iran Capital Market Insight 3In addition, the performance (annual return in percent) of TEDPIX is compared with MSCI
Emerging Market TRI and S&P/OIC COMCEC 50 SHARIAH TRI.
Figure 2: TEDPIX, MSCI, COMCEC Annual Returns in a Window
70%
60%
50%
40%
30%
20%
10%
0%
-10%
9/2/2017
10/12/2017
10/22/2017
11/11/2017
11/21/2017
12/11/2017
12/21/2017
12/31/2017
2/9/2018
3/1/2018
6/9/2018
7/9/2018
8/8/2018
8/23/2017
9/12/2017
9/22/2017
10/2/2017
11/1/2017
12/1/2017
1/10/2018
1/20/2018
1/30/2018
2/19/2018
3/11/2018
3/21/2018
3/31/2018
4/10/2018
4/20/2018
4/30/2018
5/10/2018
5/20/2018
5/30/2018
6/19/2018
6/29/2018
7/19/2018
7/29/2018
8/18/2018
tri MSCI COMCEC
MSCI Emerging Market TRI: The index includes securities from 23 countries; however, excludes stocks from
emerging and frontier economies.
COMCEC: The S&P/OIC COMCEC 50 Shariah is designed to provide investors with a Shariah-compliant
benchmark that measures the performance of leading companies from the Organization of Islamic Cooperation
(OIC) member states.
TSE and IFB Market Capitalization
Share of the IFB and the TSE market capitalization in comparision with end of July is
demonstrated below. The IFB is younger and smaller; yet, has differentiated itself in hosting
state-of-the-art financial instruments.
Figure 3: TSE and IFB Market Capitalization Comparison
Aug-18 5,231,137 1,764,737
Jul-18 4,236,948 1,604,525
0 1,500,000 3,000,000 4,500,000 6,000,000 7,500,000
Billion Rials
Tehran Stock Exchange (TSE) Iran Fara Bourse (IFB)
Iran Capital Market Insight 4Industries Market Capitalization
Tehran Stock Exchange
The break-down of top industries' market capitalization in the IFB and the TSE is depicted in
the next two figures.
FIGURE 4: TSE TOP 10 INDUSTRIES
Electricity, gas, others, 12.6%
steam and steam
Manufacture of
supply, 2.5%
chemical products,
Automotive and 27.0%
manufacturing parts,
2.7%
Computer and
related activities ,
3.4%
Post and Manufacture of basic
telecommunications, metals , 17.9%
5.1%
Manufacture of coke,
refined petroleum products
Banking and financial Multidisciplinary and nuclear fuel, 8.8%
institutions, 5.3% industrial activities, Mining of metal
6.0% ores, 8.8%
Iran Fara Bourse
FIGURE 5: IFB TOP 10 INDUSTRIES
Manufacture of
chemical products
25.1%
others
40.8% Manufacture of basic
metals
12.9%
Real estate activities Banking and financial
1.3% institutions
5.8%
Manufacture of food
products and beverages Manufacture of coke, refined
1.4% petroleum products and nuclear fuel
4.1%
Monetary and financial Insurance and pension
intermediation funding, except compulsory Electricity, gas, steam Investment
1.6% social security and steam supply 2.7%
2.2% 2.2%
Iran Capital Market Insight 5Exchanges' Trading Statistics
Value and volume of trades for each exchange is depicted in the following table.
Table 2: Value and Volume of Trades for Each Exchange
Exchange Date
Aug 2018
Trading Volume - Million Shares 50,229
TSE
Trading Value - Billion Rials 142,810
Trading Volume - Million Shares 13,748
IFB
Trading Value - Billion Rials 91,511
IME Trading Value - Billion Rials 110,113
IRENEX Trading Value - Billion Rials 8,028
Total Trading Value (Billion Rials) 352,462
Iran Capital Market Insight 6Instruments' Trading Statistics
Trading value and volume of each instrument is depicted in the following figures.
Figure 7: Trading Value and Volume of Each Instrument
Commodity Markets Trading Statistics
Trading Value (Billion Rials) Trading Volume (Million Stocks)
8,304 3 0.1 697.3
3% 0% 0% 1%
67.4
Stocks 0%
58,093
25%
Sukuk
167,921
Derivatives 72%
63,212.7
99%
Exchange Traded
Funds (ETFs)
Figure 8: IME Trade Value of Different Groups Aug
Jul
40,918
197,886
38,016
37,310
25,255
28,948
5,802
2,675
170
462
-
48
110,161
267,329
0 50,000 100,000 150,000 200,000 250,000
Billion Rials
Iran Capital Market Insight 7Aug
Figure 9: IRENEX Trade Value of Different Groups
Jul
7,348
7,974
624
53
56
12
8,028
8,039
0 2000 4000 6000 8000 10000
Billion Rials
Share of Institutional and Individual Investors in Trading Value
Figure 10 reveals the proportion of individual and institutional investors in total market
trading value.
Figure 10: Investors' Proportion in Trade Value of Four
Exchanges
Individual
97,303 Billion Rials
41.5%
Institutional
58.5%
137,018 Billion Rials
Iran Capital Market Insight 8Institutional and Individual Transactions
Institutional and Individual contribution for each catogery of instruments is demonstrated in
the following figure.
Figure 11: Investors Trading Value of Securities
100%
90%
80%
45.9%
70%
67.3% 67.7%
60%
93.4%
50%
40%
30%
54.1%
20%
32.7% 32.3%
10%
6.6%
0%
Stocks ETFs Sukuk Derivatives
Share of Individual transactions value Share of Institutional transactions value
Figure 12: Comparing of Institutional and Individual Transactions Based on Markets
Comparing of Institutional transactions based on Comparing of Individual transactions based
markets on markets
0.00%
3.93% 0.00%
2.79%
Stocks
ETFs
39.61%
Sukuk
56.31%
Derivatives
93.28%
4.08%
Iran Capital Market Insight 9Sukuk
Outstanding Sukuk
The outstanding value of each Islamic securities (sukuk) is presented in the following figure.
It is noteworthy that all instruments in the Iran capital market are Shariah compliant.
Figure 13: Outstanding Value of Each Type of Sukuk Amounting 763,057 Billion Rials
15.9%
Governmental Musharaka 21.0%
Governmental Ijarah Sukuk
4.7%
Governmental Salam
Governmental Murabahah Sukuk6.6% 6.4%
Islamic Treasury Bills 0.7%
Governmental Manfaat 7.5%
Musharaka Securities Issued
Municipalities
Sukuk Issued by Corporations
37.2%
Number of Listed and Unlisted Companies
Number of listed and registered companies on the TSE and the IFB are presented in the
following table.
Table 3: Number of Listed and Registered Companies on TSE and IFB
Aug 2018
Listed Companies in the TSE 325
Listed Companies in the IFB 98
Unlisted Companies in the IFB 167
Iran Capital Market Insight 10Initial Public Offerings
The detail of IPOs in the TSE and the IFB is shown in the following table.
Table 4: detail of IPOs
Exchange Industry Company Name Ticker No.Shares Offering
Date
Automotive and
Iran Khodro
IFB manufacturing IKDP 4,989,000,000 2018/08/18
Diese
parts
Automotive and
IFB manufacturing Ravan Fan Avar RFNZ 100,000,000 2018/07/29
parts
Automotive and
Kerman Khodro
IFB manufacturing KKHP 5,000,000,000 2018/08/18
E.
parts
Manufacture of
N. Pouneh
IFB food products and NPMP 641,116,000 2018/08/01
Mashhad
beverages
Iran Capital Market Insight 11MONTH IN REVIEW
2nd Round of League of Stock Market Stars
On its way to boost and enhance financial literacy and also to expand financial inclusion, the
SEO inaugurated the second edition of League of Stock Market Stars on July 7th, 2018. A two-
month competition among six-member teams from different universities across the country,
where higher portfolio value means a higher place in the competition, the League has
attracted 30 teams from different universities that are granted initial credit worth 50 million
IR rials to build and grow their portfolios.
It is believed that the event will elevate financial literacy and promote the capital market in
society. The League has attracted and involved students, professors, families and even
officials from different cities to remind society of the crucial role of financial markets in the
domestic economy.
Moreover, the participants will learn how to grow small resources in a transparent
environment while grappling practically with investments, regulations, mechanisms and
strategies of financial markets in an authentic arena.
Needless to mention, it was reported that last year 15 of the participants were recruited by
financial institutions soon after the League.
Apart from the unparalleled opportunity for the students, the event is a reminder for officials,
market participants and financial institutions of their responsibilities to benefit from these
young minds.
A New Chapter in Iran-China Capital Markets Relationship
During President Rouhani’s last visit to China, a memorandum of understanding was signed
off between the Securities and Exchange Organization and China Securities Regulatory
Commission on 11 Jun, aimed to strengthen reciprocal cooperation and exchange technical
expertise.
Dr. Shapour Mohammadi, CEO of SEO, referring to the MoU, mentioned that cooperation
with global organizations and enhancing constructive international interactions has always
been high on SEO’s agenda. The document was signed by the Minister of Economic Affairs
and Finance Masoud Karbasian as a part of cooperation agreements between the two
countries.
Dr. Mohamadi noted that both regulators were in constant contact in the past few years and
to make it effective and formalized, they entered into a MoU to start a new chapter in their
cooperation.
Iran Capital Market Insight 12The details of the MoU encompasses connecting the department of Research, Development
and Islamic Studies of the SEO to China Institute of Finance and Capital Markets, developing
Islamic financial instruments for China and transferring Iran’s experience in the field,
conducting comparative studies, holding mutual training workshops, exchanging views and
experience regarding the two Iranian and the four Chinese commodity exchanges to boost
mutual exportation, issuing Iran’s sovereign debt securities in China to foreign investors as
well as including Iranian institutions in the One Belt, One Road Initiative which is a huge
program by China to revive the historic Silk Road as an economic belt.
Enhanced IT Infrastructures in Capital Market
Enhancing the infrastructure of the Iranian Capital market has always been a top agenda for
the SEO. Information and Financial technologies have been a great assistance to provide more
electronic services to the investors. The SEO Chairman, Shapour Mohammadi, named a
couple of developments during the current year that has advanced the markets. CODAL 360,
a comprehensive platform encompassing all disclosure requirements by the Iranian issuers,
was mentioned first. It provides investors with free and easy access to all the fundamental
information of the listed companies and issuers. It has considerably increased transparency
and velocity of issuers’ direct filings. The round-the-clock alert system sends notifications to
top managers of each issuer as their timely reports are due or their companies have breached
disclosure requirements e.g. missed a deadline. It has considerably lowered the number of
violations, which inevitably led to freeze or suspension of the companies’ ticker symbols due
to unintentional negligence. Companies in the process of capital raise will also be notified
about the latest status of their submitted application and will be immediately informed about
additional documents that may need to be filed in order to minimize the processing time. The
Iran Fara Bourse and Tehran Stock Exchange also enjoyed a fresh update for their core trading
systems. Due to a constantly increasing load of trading on the equity exchanges, it was
decided to first separate the trade engine of the IFB from that of the TSE and then upgrade
the cores with the help of international entities. It divided the load and increased the overall
stability of the systems to prevent possible sudden crashes. Mohammadi concluded that a
capital market empowered with top-notch technologies will be transparent and deter
fraudulent activities.
Crowd Funding Regulations Approved
Securities and Exchange High Council approved the proposed regulations for Crowd Funding
that helps financing SMEs and entrepreneurs with innovative ideas. The Chairman of the
Securities and Exchange Organization, Shapour Mohammadi, explained that the regulation,
approved by the High Council on May 14, is in line with the tripartite MoU signed January 13
among Ministries of Finance and Economic Affairs, Labor and Social Affairs, and
Communication and Information Technology.
The regulation was drafted with the help of beneficiaries including exchanges and submitted
to the By-Law Committee of the SEO, which is in charge of setting up multiple sessions to
Iran Capital Market Insight 13review and make necessary modifications to all rules and regulations prior to submission to
SEO’s board. After approval by the SEO board, the regulation was approved by the High
Council.
Crowdfunding is a contemporary and popular fundraising method in the world, which is based
on the web platforms, where requesting party will use a specific platform to pitch their
project or idea to potential contributors. The whole process is supervised and regulated.
In many countries the investors will, in turn, receive certificates that can be transformed in
the future e.g. if the company is floated, the investors will receive shares in proportion to
their initial investment. This is a suitable exit strategy for investors.
Crowdfunding is applicable for small, innovative and short-term projects like developing
mobile apps, designing computer software, restoring and reconstructing buildings, producing
movies or any other project that can take the participation form.
Mr. Mohammadi underlined that based on the regulations, the requesting party can raise up
to 20 billion IR rials ($4.7 million) by using a licensed platform and issuing electronic
certificates, exempted from registration at SEO. The open projects have the ceiling of 200
billion IR rials ($47 million), which is not allowed for big enterprises and listed companies on
the Tehran Stock Exchange and Iran Fara Bourse, a decision to make it fully available for SMEs.
The request shall be submitted by or through one of the supervised financial institutions and
is decided upon by a working group at IFB. The kind of financial institutions allowed to bring
forward the requests will be subsequently announced by the SEO.
The Chairman hoped that the move will provide the suitable ground for financing innovating
companies.
Fund of Funds, in Iran Capital Market
The SEO ratified the statute of fund of funds, which is an investment strategy for holding a
portfolio of other investment funds. The Iran Farabourse is the first entity to apply for the
fund of funds establishment. This vehicle is another strategy for adding more diversity to the
capital market and in the foreseeable future, both foreign and domestic investors will benefit
from this new fund.
Iran Capital Market Insight 14Iran Capital Market Insight 15
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