Iran Capital

Market Insight

January 2019

Iran Capital Market Insight 3

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

Change (%) Dec 2018 Jan 2019 Index

6.08% 156,083 165,575 TEDPIX

11.23% 1,791 1,992 IFX

The past year trend of the indices is illustrated in the following figure.

800

950

1,100

1,250

1,400

1,550

1,700

1,850

2,000

2,150

2,300

2,450

83,000

93,000

103,000

113,000

123,000

133,000

143,000

153,000

163,000

173,000

183,000

193,000

12/2

6/2

017

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8

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/201

9

Figure 1: Major Indices

TEDPIX - (Left Axis) IFB - (Right Axis)

Iran Capital Market Insight 4

In addition, the performance (annual return in percent) of TEDPIX is compared with MSCI

Emerging Market TRI and S&P/OIC COMCEC 50 SHARIAH TRI.

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 December is demonstrated below. The IFB is younger and smaller; yet, has differentiated itself in hosting state-of-the-art financial instruments.

-20%

0%

20%

40%

60%

80%

100%

120%

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/201

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/201

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/201

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/8/2

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/18/2

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8

10

/28/2

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11

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11

/17/2

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/17/2

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8

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/201

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1/1

6/2

019

Figure 2: TEDPIX, MSCI, COMCEC Annual Returns in a Window

tri MSCI COMCEC

5,924,682

6,272,917

2,233,920

2,383,496

0 3,000,000 6,000,000 9,000,000

Dec-18

Jan-19

Billion Rials

Figure 3: TSE and IFB Market Capitalization Comparison

Tehran Stock Exchange (TSE) Iran Fara Bourse (IFB)

Iran Capital Market Insight 5

Industries 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.

Iran Fara Bourse

Manufacture of chemical products,

23.8%

Manufacture of basic metals , 14.6%

Manufacture of coke, refined petroleum products

and nuclear fuel, 10.3%

Mining of metal ores, 9.6%

Banking and financial institutions, 7.6%

Multidisciplinary industrial activities,

5.9%

Post and telecommunications,

5.1%

Computer and related activities , 3.2%

Automotive and manufacturing parts,

2.8%

Pharmaceutical products, 2.7%

others, 14.5%FIGURE 4: TSE TOP 10 INDUSTRIES

Manufacture of chemical products

20.6%

Manufacture of basic metals 14.3%

Banking and financial institutions

4.2%

Mining of metal ores4.1%

Electricity, gas, steam and steam supply

3.5%

Manufacture of coke, refined petroleum products and nuclear fuel

3.1%

Insurance and pension funding, except compulsory social security

2.4%

Investment2.2%

Manufacture of food products and

beverages1.8%

Financial intermediaries

1.5%

others42.3%

FIGURE 5: IFB TOP 10 INDUSTRIES

Iran Capital Market Insight 6

Exchanges' 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

Date Exchange

Jan 2019

56,215,560 Trading Volume - Million Shares TSE

146,304 Trading Value - Billion Rials

18,394,103 Trading Volume - Million Shares IFB

89,564 Trading Value - Billion Rials

103,558 Trading Value - Billion Rials IME

8,722 Trading Value - Billion Rials IRENEX

351,148 Total Trading Value (Billion Rials)

Instruments' 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

180,65276%

46,01819%

1370%

12,0605%

Trading Value (Billion Rials)

Stocks

Sukuk

Derivatives

Exchange TradedFunds (ETFs)

…

51.70%

1393.02%

1232.52%

Trading Volume (Million Stocks)

Iran Capital Market Insight 7

84,075

264

1,590

15,836

34,133

32,252

103,559

118

392

30,312

42,816

29,921

0 30,000 60,000 90,000 120,000

Figure 8: IME Trade Value of Different Groups Jan

Dec

Billion Rials

7,846

16

1,523

6,307

8,722

5

44

8,673

0 4000 8000 12000 16000

Figure 9: IRENEX Trade Value of Different GroupsJan

Dec

Billion Rials

Iran Capital Market Insight 8

Share of Institutional and Individual Investors in Trading Value

Figure 10 reveals the proportion of individual and institutional investors in total market

trading value.

Institutional and Individual Transactions

Institutional and Individual contribution for each catogery of instruments is demonstrated in

the following figure.

48.4%51.6%

Figure 10: Investors' Proportion in Trade Value of Four Exchanges

Individual123,241

Billion RialsInstitutional

115,627 Billion Rials

64.4%

28.6%

7.3%

33.0%

35.6%

71.4%

92.7%

67.0%

Stocks ETFs Sukuk Derivatives

Figure 11: Investors Trading Value of Securities

Share of Individual transactions value Share of Institutional transactions value

Iran Capital Market Insight 9

Figure 12: Comparing of Institutional and Individual Transactions Based on Markets

Sukuk 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.

18.5%

5.7%

0.6%

5.5%

45.8%

5.8%

3.2%

15.0%Governmental Musharaka

Governmental Ijarah Sukuk

Governmental Salam

Governmental Murabahah Sukuk

Islamic Treasury Bills

Governmental Manfaat

Musharaka Securities IssuedMunicipalities

Sukuk Issued by Corporations

Figure 13: Outstanding Value of Each Type of Sukuk Amounting 866,543 Billion Rials

55.57%

7.44%

36.91%

0.08%

Comparing of Institutional transactions based on

markets

Stocks

ETFs

Sukuk

Derivatives94.4%

2.8%2.7% 0.0%

Comparing of Individual transactions

based on markets

Iran Capital Market Insight 10

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

Jan 2019

323 Listed Companies in the TSE

106 Listed Companies in the IFB

163 Unlisted Companies in the IFB

Initial Public Offerings The detail of IPOs in the TSE and the IFB is shown in the following table.

Table 4: detail of IPOs

Offering Date

No.Shares Ticker Company Name

Industry Exchange

2019/01/13 690,000,000 DKHZ Dashte

Khoramdareh Agriculture and related services

IFB

Iran Capital Market Insight 11

MONTH IN REVIEW

Housing Units can be Traded on Iran Mercantile Exchange

Trading of housing units on the Iran Mercantile Exchange will be feasible in the near future.

The physical trading of housing units can be done on the IME, said Chairman of the Securities

and Exchange Organization Dr. Shahpour Mohammadi. “We are ready to amend the related

regulations as required to help housing units’ owners offer their products on the capital

market,” he added. A major challenge in this regard has always been the fact that housing

units are not homogenous so that they cannot be offered on the capital market. If the

challenge is addressed in some way, there seems to be no serious obstacle for the regulator

to let the housing units be traded on the IME.

Iran’s housing market has benefitted little from the capital market in the past years. Banks

have been the major financing source for housing projects in the country. Yet, a few

instruments already exist on the capital market that have been welcomed by the public.

Housing securities, for instance, have been among popular tools, according to Dr.

Mohmmadi. However, he said, applicants complain that the bureaucratic process for trading

the bonds has been very slow in some cases. A number of specialized funds have also been

active on the capital market offering financial solutions to the housing industry’s players. But

there is still more that can be done, officials believe. Dr. Mohammadi called on industry

players to help plan for their stronger presence in the capital market.

Establishment of Stock Index Futures

“Stock index futures”, an instrument designed to limit trading risk, is likely to be offered on

the Iranian capital market for the first time. The instrument already passed the financial

regulator’s jurisprudence committee, a supervision body that ensures the applied procedures

on the capital market are in line with the Islamic Law.

The stock index futures will enable traders to purchase a range of stocks at a specified price

for future sale. The new instruments, such as the index futures, can significantly contribute

to the deepening of the market and help attract more investment. Index futures are contracts

based on a financial index, which can be bought or sold for speculative or hedging reasons,

or for future delivery.

New Round of Crude Trading Expected on Energy Exchange

Selling of crude on the Iran Energy Exchange will resume as soon as market officials receive

instructions from the Petroleum Ministry explaining what technical requirements are

required ahead of the offering. “The regulator is prepared for a new round of crude offering

on the capital market,” Chairman of the Securities and Exchange Organization Dr. Shahpour

Mohammadi said. The trading of oil could be carried out in Iranian rial (IRR) as well.

Iran Capital Market Insight 12

The Iranian government has recently allowed the private sector to buy oil in the stock market

and export it. Officials are now trying to make it “legally” possible for oil traders to sell and

buy crude in the Iranian and foreign currencies alike. The very first round of the offering of

oil was a successful experience, officials claim. The new round of crude offering is expected

to resume soon.

First Algorithmic Trading Competition in Iran’s Capital Market

The SEO, in order to enhance the level of financial capabilities and literacy, has organized a

one of-a-kind competitive setting where different groups of traders sit together and trade in

the real market using algorithmic models. The competitors have been granted a real portfolio

with an acceptable credit and will be trading algorithmically for around one month. This

competition is a follow-up of the league of stars competition where the competitors used the

typical trading patterns. The First Algorithmic Trading Competitions is another step taken to

raise the awareness of investors and get them acquainted with alternative methods to trade

in the capital market.

Membership in SFN task force in IOSCO

Another step taken by the SEO to have a more active role and presence in IOSCO is its

membership in a new task force in IOSCO, the SEO has recently joined Sustainability Finance

Network formed by IOSCO to prepare a platform for the members to share their experiences

and prospective plans in the areas related to green and sustainability financing. Over 50

countries are the current members of this network.

Membership of SEO in Investor Protection Task Force in IFSB

IFSB has recently formed a task force aiming to share the members’ experiences and deeds

in the realm of investor protection and education. The SEO has been invited to be part of this

taskforce and will be taking part in its upcoming meeting in Malaysia. The members will be

benefiting from the ideas shared in the taskforce work stream and can upgrade their germane

activities.

Iran Capital Market Insight 13