Tehran Stock Exchange
Encyclopedia
The Tehran Stock Exchange (TSE) is Iran
's largest stock exchange, which first opened in 1967. The TSE is based in Tehran
. As of July 2010, 337 companies with a market capitalization of US$72 billion were listed on TSE. TSE, which is a full member of the World Federation of Exchanges
and a founding member of the Federation of Euro-Asian Stock Exchanges
, has been one of the world's best performing stock exchanges in the years 2002 through 2010. TSE is an emerging or "frontier" market
.
The most important advantage that Iran's capital market
has in comparison with other regional markets is that there are 40 industries
directly involved in it. Industries such as the automotive, telecommunications
, agriculture, petrochemical
, mining, steel iron, copper, banking and insurance, financial mediation and others trade shares at the stock market, which makes it unique in the Middle East.
The second advantage is that most of the state-owned firms are being privatized
under the general policies of article 44 in the Iranian constitution. Under the circumstances, people are allowed to buy the shares of newly-privatized firms. Iran
is among the few major economies that has maintained positive economic growth
despite the 2008 global financial crisis and international sanctions
imposed by the United States, the European Union and the United Nations Security Council.
together with Belgian experts wrote a report detailing the prospects of having an operational stock exchange in Iran. The outbreak of World War II and other political factors delayed implementation until 1967, when the Government revisited the issue and ratified the "Stock Exchange Act". Consequently a small exchange, the Tehran Stock Exchange (the "TSE") began its operations in 1967. Trading was initially in corporate and government bonds. The economic boom in the 1970s led to a pent-up demand for equity. Meanwhile, certain forces were changing the economic backdrop in Iran. The Government was actively involved in the grant of shares to employees for large state-owned and family-owned enterprises. Market activity was reaching a frenzy with many companies and high net worth individual
s vying to participate in the new-found wealth associated with the TSE.
Everything came to a standstill after the Islamic Revolution leading in a prohibition against interest-based activities
and nationalization of major banks and industrial giants. Mobilization of all resources towards the war effort during the 8-year Iran-Iraq war
did not help matters. However, the Government fully embraced economic reforms
and a privatization initiative
in 1989 with a surge of activity in share activity of many state-owned companies through the defined targets in the first "Five-Year Economic Reform" where the Government together with the Parliament
defined the economic prospects of the country for the coming five years. Attention to promotion of the private sector and new interest in the TSE brought life back to the market. However, lack of regulation and out-of-date legal framework led to crisis in the market leading to certain "meltdowns" until today. The market has experienced its share of highs and lows in the past years including topping the World Federation of Exchanges
' list in terms of performance in 2004 to tumbling down to last place in 2007 due to political uncertainties in the region.
*Exchange rate
: 1 US $=10,004 IRR
(2009)
(the former Fédération Internationale des Bourses de Valeurs or FIBV), and is a founding member of Federation of Euro-Asian Stock Exchanges
(FEAS).
gun-metal relief found in Lorestan province, showing four men holding hands, representing cooperation, inside circles representing a globe, which then stands on two cows, symbolising prosperity.
from 9am to 12 noon, which is integrated with a clearing, settlement, depository and registry system. Settlement is T+3. The TSE is solely an order-driven market and all transactions are executed in the manner and under the principles of open auction.
and attracting more domestic and foreign investors. Concrete measures that have been taken in the planning and operations of the stock exchange such as the settlement system, geographical expansion, new exchange laws in order to attract local and foreign capital. The TSE has installed the new trading system which has been purchased from Atos Euronext Market Solutions (AEMS)
in 2007.
The new system makes it possible to purchase and sell stocks on the same day. The system has also made it possible for 2,000 brokerage stations to work simultaneously, while the number was just about 480 in the past. The rise in electronic dealing, non-stop input and updated data on orders, transactions and indices are among other features of the new system. The new system has made it possible to link the stock market to the international bourses. The bourse can now handle 700 transactions per second and 150,000 transactions per day.
The trading system is an order driven system, which matches buying and selling orders of the investors. Investors can place their orders with TSE accredited brokers
, who enter these orders into the trading system. Then, the system automatically matches buy and sell orders of a particular security based on the price and quantity requirements. The mechanism for which the price of equities is determined is as follows:
Under the price priority rule, a selling (buying) order with the lowest (highest) price takes precedence. Under the time priority rule, an earlier order takes precedence over others at the same price. Thus, when the lowest sell and the highest buy orders match in price, the transaction is executed at the price. In short, the TSE market is a pure order-driven Market
.
The trading system also generates and displays details of current and historical trading activity, including prices, volume
s traded and outstanding buy and sell orders. This ensures that investors have the required information to be able to take informed investment
decisions.
The range of price movements is typically restricted to 3% daily either way from last closing. Restriction on Rights
is 6%. This can be changed in specific situation by the Board of the TSE in case of unusual price movements resulting in an extremely high or low P/E ratio
. Short selling
is not permitted. There are no minimum trading lots. According to the Iranian Commercial Law, companies are prohibited from share repurchases. TSE Services Company (TSESC)
, who is in charge of the site, supplies computer services. TSESC is a member of Association of National Numbering Agencies (ANNA).
s). Secondary Market is an exchange facility where the listed securities of small and mid-size companies can be traded efficiently and competitively. Any company, domestic or foreign, can list their products on the exchange for as long as they meet the listing criteria. The value of three markets of Securities and Stock Exchange, Over-the-Counter (OTC) stock exchange and commodity exchange hit $100 billion in December 2010. In 2010, the Kish Stock Exchange
was launched to facilitate foreign investment
and monetary activities in Kish Island free trade zone.
Since 1998 importers and exporters have also been permitted to trade foreign-exchange certificates on the TSE, creating a floating value for the rial
known as the "TSE rate". In 2002 the "official rate" was abolished, and the TSE rate became the basis for the new unified foreign exchange
regime.
(OTC) market for bonds and equities (aka Farabourse). Its shareholders include the Tehran Stock Exchange
Corporation (20%), several banks, insurance companies and other financial institutions (60%), and private and institutional shareholders (20%).
for futures contracts is set at 1-to-10. TSE will only deal in the derivatives
through electronic trading
.
Every year Tehran Stock Exchange ranks the brokers regarding their performance during one year. for the past four years (2007, 2008, 2009, 2010) Mofid Securities Company has been ranked the 1st.
from anywhere in the world (on a trial basis since July 2010), or get all the necessary information before traveling to Iran. There are 87 online service providers which offer round-the-clock information and services about Iran and its stock market. As of September 2011, 40,000 shareholders are registered and conducting transactions online.
are being traded at TSE at the moment. The plan is to introduce other financial instruments
in the near future. The introduction of project-based participation certificates that bear a fixed annual return during the period of the project and promise the final settlement of the profit
at the date of its completion, has diversified the market.
(IME). In July 2010, TSE introduced six single-stock futures contract
s based on Parsian Bank
and Karafarin Bank, which will expire in two, four and six months. Thirty-one of the 88 brokerages active in the TSE are licensed to trade the futures contracts. The leverage
for futures contracts is set at 1-to-10. TSE will only deal in the derivatives
through electronic trading
.
(MC) of US$42,452 million. Close to 60% of the MC relates to listed companies from the following sectors:
A total of 161 companies from these sectors are listed on the TSE, which translates to 49.7% of total companies listed. Largest stocks include:
2008: other companies in the top spots included:
This indicates that the capital market
in Tehran
is heavily concentrated on four economic sectors with companies that make up nearly half of the total listed companies on the exchange. While 163 companies listed are spread out amongst 26 sectors, with the "Food and Beverages Sector" alone accounts to 32 companies at a market capitalization of US$897.5 million. Studies show that in 2008 about 30 firms, involved in 11 industries, hold close to 75% of shares in Tehran Stock Exchange.
2009: A comparison of the top 100 Iranian companies and the Fortune 500
in 2009 indicated that the gross profit margins of the top 100 Iranian companies were almost double those of the Fortune 500. For Fortune 500 companies, the average gross profit margin was 6.9% and for the Iranian companies, it was 13%. The sector with the highest profit margin
among the top 100 Iranian companies in 2009 is mining, with a margin of 58%. The mining companies in the Fortune 500 had a gross profit margin of 11%. After mining, other industries with highest margins are base metals, and telecommunications.
2011: The best performing industries in 2011, in terms of total sales, were the banking and automotive sectors. The worst performers were home appliances and electronics. In terms of gross profit margin, mining
, telecommunications
, and oil and gas exploration & production
were the best performing industries. Sales totals of the top 100 Iranian companies on the list ranged from $12.8 billion or the top ranking company, Iran Khodro
, to $318 million for the 100th company.
, one of the largest institutional investors on the TSE. Bonyad
s also play a leading role in TSE trading. In 2005 fewer than 5 percent of Iranians owned stock.
The Government is promoting the shareholding culture in Iran. By March 2010, 3.219 million shareholders had registered in the TSE, with investment firms having 562,375 shareholders, which makes it the "favorite industry" in the stock market. By September 2011, the number of registered shareholders in the TSE had increased to 4.5 million.
s managed by permitted brokerage firms and investment banks are investing in the TSE according to the investment funds regulation. Mutual funds are open ended and their operation permission is issued by the Iran Securities and Exchange Organization (SEO). Since then, 41 funds have been established, four of which are fixed income
funds and the remainder of which are equity funds. As of August 2010, total assets under management
within the Iranian fund management industry amount to approximately $230 million with great potential for development.
• TSE Dividend & Price "total return
" Index (TEDPIX)
• TSE All-Share FF adjusted (TEFIX)
• TSE Cash Dividend Index (TEDIX)
• TSE-50
• Each industry (sector) Index
• Industrial Index
• Financial Index
• Each Company Index (based on Price & Volume)
In 1990, the All-Shares Price Index (TEPIX) was introduced to the market as the main indicator of share price movements.TEPIX is a weighted market value of all share prices appearing on the TSE Board and is measured every two minutes. In addition to the TEPIX, daily price indices of shares of each company, each sector, and the "Top Fifty" most active companies (TSE-50) are computed.
with major exchanges or emerging stock markets over the past few years and not even with the oil price. While the overall indices of the world’s five major exchanges – New York
, London
, Paris
, Frankfurt
and Tokyo
plunged by 40 to 70% between March 2001 and April 2003, the TSE index (Tepix) bucked the trend by going up nearly 80%.
2005–2006: In December, 2005, 419 companies with a market capitalization of IRR
32,741.7 million were listed in TSE. The TSE has had an exceptional performance over the past 5 years. In general, the stock market in 2005/06 shed value as it is manifested by the decline of its major stock price indices. The TSE price index (TSPIX) at the end of 2005/06, declined by 21.9%, while the Financial Sector Index, and the Industrial Index, declined by, 38.8%, 19.4% respectively, and the Dividend
Index gained 11.8%, mostly due to a reported 100 billion USD capital flight
from the country because of the international dispute
surrounding the Iranian nuclear programme.
2007: The market bottomed in June 2007 mainly because of the renewed privatization
drive in the Iranian economy.
2008: The TSE was not directly affected by the international financial turmoil in 2008, but following the global reduction in prices of copper and steel, the bourse index dropped by 12.5 percent, as most of the companies listed on the exchange are producers of such commodities. TSE experienced an 11% growth at the end of 2008 and ranked second in the world in terms of increase in the volume of trade after Luxembourg’s Bourse.
2009: The TSE sank about 40% in value between August 2008 and March 2009, influenced by falling oil prices and declining markets in other parts of the world. As of August 1, 2009 it has recovered by more than 10%. During Iranian year 2009/10, the value of capital market was around $20 billion. Some 3 million trade exchanges were made, pushing up the index to 12,500 units from the previous 8,000 units.
2010: In the first month of Iranian 2010
(March 20 – April 21, 2010), the index hit the 14,000 unit mark, up from the previous 12,500, showing 12 percent growth. The value of one month's trading transactions exceeded $1 billion against the previous year's corresponding period of $95 million. Tehran Stock Exchange bourse index from June 2009 to 2010 grew 55 percent and the value of TSE's total market capitalization
went up about 33 percent, to over $71 billion.
On August 2, 2010, the TSE main index (TEPIX) reached a record level of 16,056 points, despite US-sponsored sanctions against Iran
. Thus, TEDPIX became the world’s second-best performing equity index. Factors such as the global spike in oil and metal prices, government support for industries and oil sectors as well as the growth of stock market liquidity flow contributed to the boom. Experts commented that the growth was also partly due to a government decision to sell off 20 percent of its equity in two major automakers. Given the relative low market valuation
of TSE stocks in 2010, the upward trend was expected to continue over the long run, rather than being a bubble
. TEPIX reached a new record on September 18, 2010, when it hit 18,658, up from 11,295 at the start of the year. As of December 2010, the TSE index rose about 64 percent since the start of 2010. The Tehran Stock Exchange has been ranked as the best bourse index in Europe
, Africa and Middle East in 2010 in terms of performance of the main index.
2011: On February 1, 2011, TEPIX and total market value
reached an all-time high of 21,349 and USD 100 billion respectively. An alleged $200 million investments by Iranian expats
also contributed to this increase.
On April 9, 2011, TSE's main index (TEPIX) hit a new all-time record high at 26,222 over a boost from the stocks of metal and shipping industries
. According to the World Federation of Exchanges
(WFE), TSE had the best performance among WFE member exchanges from May 2010 to May 2011. With a staggering 79% growth rate in its main index, the TSE ranked 1st in WFE’s “Broad Stock Index Performance” category followed by the Colombo
and Lima Stock Exchanges with 75.1% and 48.9% rates respectively.
has many investment opportunities, particularly on its stock exchange. The Central Bank of Iran indicate that 70 percent of the Iranians own homes with huge amounts of idle money entering the housing market. However, if the stock market grows stronger, it will undoubtedly attract idle capital. In terms of investment, the domestic rival markets of the bourse are the Iranian real estate market, gold
and car. According to Goldman Sachs
, Iran is forecast to reach the highest economic growth between 2015 and 2025 and join the world's largest economies
(world's 12th economy by 2025).
enjoyed by Iran's neighbours, while average earnings continued to grow at about 25 per cent a year. As of 2010, the price-to-earnings
rate in Iran's market stands at around six while it is 15 in regional markets. With the removal of obstacles to foreign investment
Iran could potentially have a 2,000–3,000 billion US dollar stock exchange market. Due to the price gains the average dividend yield
has fallen from 16 per cent in 2009 to 13 per cent in 2010.
of the article 44 of the Iranian Constitution in 2004 has allowed 80% of state assets to be privatized, 40% of which will be conducted through the "Justice Shares" scheme and the rest through the Bourse Organization. The government will keep the title of the remaining 20%.
Under the privatization plan
, 47 oil and gas companies (including PetroIran and North Drilling
Company) worth an estimated $90 billion are to be privatized on the Tehran Stock Exchange by 2014.
Foreign investors can bid in Iranian privatization
tenders, but need permission from the Economy Ministry
on a case-by-case basis. The government has reduced the bureaucratic channels and issues investment permits for foreign nationals in less than seven days.
Iran has announced it will begin to allow foreign firms to purchase Iranian state-run companies, with the possibility of obtaining full ownership.
alone, Iranian expatriates
are estimated to have invested up to $200 billion. If 10 percent of this capital arrives, things will change drastically in Iran
. In 2000, the Iran Press Service reported that Iranian expatriates had invested between $200 and $400 billion in the United States
, Europe
, and China
, but almost nothing in Iran. FIPPA provisions apply to all foreign investors, and many Iranian expatriates based in the US continue to make substantial investments in Iran.
accounts for only about 2 percent of the stock market in Iran.
The new by-law on foreign portfolio investment was approved by the government in June 2005, but ratified by the Council of Ministers
in April, 2010. Under this new bylaw, foreign investors can participate in the TSE for the first time. Initially, however, some limitations had been imposed on foreign investors:
With the new law, Iran has increased the ceiling on foreign participation to 20% and foreign investors can now invest in the capital market, trade shares (including OTC) and:
accounts at Iranian banks and exchange their currencies to rials
and vice-versa. Foreigners who want to trade in Iran must get a license, which the exchange says will take seven days on its website.
, which is also transferrable. Moreover, under the law, foreign investors are protected and insured against possible losses and damages caused by future political turmoil or regional conflicts.
by creating an umbrella group of nearly 50 state-run firms and listing its shares on four international stock exchanges.
-based investment boutique Turquoise Partners is one of the few opportunities for foreign investors to participate on the Tehran Stock Exchange. Turquoise Partners publishes one of the few English newsletters that covers developments of the Tehran Stock Exchange and the Iranian economy called "Iran Investment Monthly". As of July 2010, Turquoise Partners says it controls around 90% of the total value of foreign investments on the Tehran Stock Exchange. Turquoise is a private company with offices in Tehran
and London
.
Videos Iran's Stock Market – Part I Part II – PressTV
Iran
Iran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...
's largest stock exchange, which first opened in 1967. The TSE is based in Tehran
Tehran
Tehran , sometimes spelled Teheran, is the capital of Iran and Tehran Province. With an estimated population of 8,429,807; it is also Iran's largest urban area and city, one of the largest cities in Western Asia, and is the world's 19th largest city.In the 20th century, Tehran was subject to...
. As of July 2010, 337 companies with a market capitalization of US$72 billion were listed on TSE. TSE, which is a full member of the World Federation of Exchanges
World Federation of Exchanges
The World Federation of Exchanges , formerly FIBV - Federation Internationale des Bourses de Valeurs , is an international organization for securities and derivative markets such as stock exchanges....
and a founding member of the Federation of Euro-Asian Stock Exchanges
Federation of Euro-Asian Stock Exchanges
The Federation of Euro-Asian Stock Exchanges is a non-profit international organization comprising the main stock exchanges in Eastern Europe, the Middle East and Central Asia. It was established on May 16, 1995 with 12 founding members...
, has been one of the world's best performing stock exchanges in the years 2002 through 2010. TSE is an emerging or "frontier" market
Frontier markets
Frontier Markets is an economic term which was coined by International Finance Corporation’s Farida Khambata in 1992. It is commonly used to describe a subset of emerging markets ....
.
The most important advantage that Iran's capital market
Capital market
A capital market is a market for securities , where business enterprises and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets...
has in comparison with other regional markets is that there are 40 industries
Industry of Iran
According to a report by the Economist, Iran has been ranked 39th for producing $23 billion of industrial products in 2008. From 2008 to 2009 Iran has leaped to 28th place from 69th place in annual industrial production growth rate. A recent report by the World Fact Book ranks Iran 3rd among...
directly involved in it. Industries such as the automotive, telecommunications
Communications in Iran
Iran’s telecommunications industry is almost entirely state-owned, dominated by the Telecommunication Company of Iran . Fixed-line penetration in 2004 was relatively well-developed by regional standards, standing at 22 lines per 100 people, higher than Egypt with 14 and Saudi Arabia with 15,...
, agriculture, petrochemical
National Iranian Petrochemical Company
The National Iranian Petrochemical Company , a subsidiary to the Iranian Petroleum Ministry, is owned by the government of the Islamic Republic of Iran. It is responsible for the development and operation of the country's petrochemical sector. Founded in 1964, NIPC began its activities by operating...
, mining, steel iron, copper, banking and insurance, financial mediation and others trade shares at the stock market, which makes it unique in the Middle East.
The second advantage is that most of the state-owned firms are being privatized
Privatization in Iran
According to the Fourth Five-Year Economic Development Plan , the Privatization Organization of Iran affiliated to the Ministry of Economic Affairs and Finance is in charge of setting prices and ceding shares to the general public and on the Tehran Stock Exchange...
under the general policies of article 44 in the Iranian constitution. Under the circumstances, people are allowed to buy the shares of newly-privatized firms. Iran
Economy of Iran
The economy of Iran is the eighteenth largest in the world by purchasing power parity and according to Iranian officials' claims is going to become the 12th largest by 2015. The economy of Iran is a mixed and transition economy with a large public sector and some 50% of the economy centrally planned...
is among the few major economies that has maintained positive economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
despite the 2008 global financial crisis and international sanctions
Sanctions against Iran
This article outlines economic, trade, scientific and military sanctions against Iran, which have been imposed by the U.S. government, or under U.S. pressure by the international community through the United Nations Security Council...
imposed by the United States, the European Union and the United Nations Security Council.
History
The concept of a stock industrialization dates back to 1936 in Iran with the largest and oldest bank in Iran, Bank MelliBank Melli Iran
Bank Melli Iran , also called the National Bank of Iran, is the first national Iranian bank. The bank was established in 1927 by the order of the Majlis and since then has consistently been one of the most influential Iranian banks.In 1931 the Iranian Majlis authorized the bank to print and...
together with Belgian experts wrote a report detailing the prospects of having an operational stock exchange in Iran. The outbreak of World War II and other political factors delayed implementation until 1967, when the Government revisited the issue and ratified the "Stock Exchange Act". Consequently a small exchange, the Tehran Stock Exchange (the "TSE") began its operations in 1967. Trading was initially in corporate and government bonds. The economic boom in the 1970s led to a pent-up demand for equity. Meanwhile, certain forces were changing the economic backdrop in Iran. The Government was actively involved in the grant of shares to employees for large state-owned and family-owned enterprises. Market activity was reaching a frenzy with many companies and high net worth individual
High net worth individual
A high-net-worth individual is a person with a high net worth. In the private banking business, these individuals typically are defined as having investable assets in excess of US$1 million. As explained below, the U.S...
s vying to participate in the new-found wealth associated with the TSE.
Everything came to a standstill after the Islamic Revolution leading in a prohibition against interest-based activities
Usury
Usury Originally, when the charging of interest was still banned by Christian churches, usury simply meant the charging of interest at any rate . In countries where the charging of interest became acceptable, the term came to be used for interest above the rate allowed by law...
and nationalization of major banks and industrial giants. Mobilization of all resources towards the war effort during the 8-year Iran-Iraq war
Iran-Iraq War
The Iran–Iraq War was an armed conflict between the armed forces of Iraq and Iran, lasting from September 1980 to August 1988, making it the longest conventional war of the twentieth century...
did not help matters. However, the Government fully embraced economic reforms
Iranian Economic Reform Plan
The Iranian targeted subsidy plan also known as the subsidy reform plan was passed by the Iranian Parliament on January 5, 2010. The government has described the subsidy plan as the "biggest surgery" to the nation's economy in half a century and "one of the most important undertakings in Iran's...
and a privatization initiative
Privatization in Iran
According to the Fourth Five-Year Economic Development Plan , the Privatization Organization of Iran affiliated to the Ministry of Economic Affairs and Finance is in charge of setting prices and ceding shares to the general public and on the Tehran Stock Exchange...
in 1989 with a surge of activity in share activity of many state-owned companies through the defined targets in the first "Five-Year Economic Reform" where the Government together with the Parliament
Majlis of Iran
The National Consultative Assembly of Iran , also called The Iranian Parliament or People's House, is the national legislative body of Iran...
defined the economic prospects of the country for the coming five years. Attention to promotion of the private sector and new interest in the TSE brought life back to the market. However, lack of regulation and out-of-date legal framework led to crisis in the market leading to certain "meltdowns" until today. The market has experienced its share of highs and lows in the past years including topping the World Federation of Exchanges
World Federation of Exchanges
The World Federation of Exchanges , formerly FIBV - Federation Internationale des Bourses de Valeurs , is an international organization for securities and derivative markets such as stock exchanges....
' list in terms of performance in 2004 to tumbling down to last place in 2007 due to political uncertainties in the region.
| 2006 | 2007 | 2008 | 2009 | |
|---|---|---|---|---|
| Number of Listed Companies | 417 | 415 | 346 | 337 |
| Market Capitalization Market capitalization Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company... (USD Millions) |
43,794 | 45,574 | 49,040 | 58,698 |
| Total Value of Share Trading (USD Millions) | 6,230 | 7,872 | 15,252 | 16,875 |
| Daily Average Trading Value (USD Millions) | 26.1 | 32.5 | 63.8 | 65.4 |
| Total Number of Trade in Share (Millions) | 15,839 | 23,401 | 37,975 | 82,479 |
| No. of Transactions (in thousands) | 1866 | 2107 | 1978 | 2646 |
| No. of Trading Days | 239 | 242 | 239 | 258 |
| Share Turnover Revenue In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover.... Velocity Velocity of money 300px|thumb|Similar chart showing the velocity of a broader measure of money that covers M2 plus large institutional deposits, M3. The US no longer publishes official M3 measures, so the chart only runs through 2005.... (%) |
15.6 | 16.37 | 26.5 | 28.74 |
| P/E ratio P/E ratio The P/E ratio of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share... |
5.4 | 5.2 | 4.1 | 5.5 |
| Dividend yield Dividend yield The dividend yield or the dividend-price ratio on a company stock is the company's total annual dividend payments divided by its market capitalization, or the dividend per share, divided by the price per share. It is often expressed as a percentage... (%) |
10.44 | 14.5 | 12.3 | 15.8 |
| Market Capitalization/GDP (%) | 17.9 | 15.4 | 14.1 | 15.2 |
*Exchange rate
Exchange rate
In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency...
: 1 US $=10,004 IRR
Iranian rial
The rial is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting....
(2009)
Industry affiliations
Since 1995, TSE has been a full member of the World Federation of ExchangesWorld Federation of Exchanges
The World Federation of Exchanges , formerly FIBV - Federation Internationale des Bourses de Valeurs , is an international organization for securities and derivative markets such as stock exchanges....
(the former Fédération Internationale des Bourses de Valeurs or FIBV), and is a founding member of Federation of Euro-Asian Stock Exchanges
Federation of Euro-Asian Stock Exchanges
The Federation of Euro-Asian Stock Exchanges is a non-profit international organization comprising the main stock exchanges in Eastern Europe, the Middle East and Central Asia. It was established on May 16, 1995 with 12 founding members...
(FEAS).
Logo
The TSE logo is based on an Achaemedian dynastyAchaemenid Empire
The Achaemenid Empire , sometimes known as First Persian Empire and/or Persian Empire, was founded in the 6th century BCE by Cyrus the Great who overthrew the Median confederation...
gun-metal relief found in Lorestan province, showing four men holding hands, representing cooperation, inside circles representing a globe, which then stands on two cows, symbolising prosperity.
Structure
- The Securities & Exchange Council is the highest authority and is responsible for all related policies, market strategies, and supervision of the market in Iran. The Chairman of the Council will be the Minister of EconomicsMinistry of Economic Affairs and Finance (Iran)The Ministry of Economic Affairs and Finances function are:*acting as the state treasury,*public finance,*economic and financial policy making,*implementing tax policies,*in charge of foreign direct investment,...
; other members are: Minister of TradesMinistry of Commerce (Iran)The Ministry of Commerce of Iran was the main organ of the Government in charge of the regulation and implementation of policies applicable to domestic and foreign trade...
, Governor of the Central Bank of Iran, Managing Director of the Chamber of CommerceChamber of commerceA chamber of commerce is a form of business network, e.g., a local organization of businesses whose goal is to further the interests of businesses. Business owners in towns and cities form these local societies to advocate on behalf of the business community...
, Attorney GeneralMinistry of Justice (Iran)Minister of Justice of the Islamic Republic of Iran is responsible for prosecuting the government cases. In other words, the justice minister is the attorney-general of the country. However, he has nothing to do with policing which is the responsibility of the Interior minister of the Islamic...
, Chairman of the Securities and Exchange Organization, representatives of the active market associations, three financial experts requested by the Economics Minister and approved by the Council of MinistersCabinet of IranThe Cabinet of Iran is a formal body composed of government officials, ministers, chosen and led by a President. Its composition must be approved by a vote in the Parliament...
, and one representative for each commodity exchange. - The Securities and Exchange Organization (SEO) is responsible for administration and supervisory duties, governed by the Board of Directors. The SEO’s Board of Directors are elected by the Securities and Exchange Council. SEO also actively promotes innovation in Islamic productsIslamic bankingIslamic banking is banking or banking activity that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees for loans of money...
and has formed a specific "ShariaShariaSharia law, is the moral code and religious law of Islam. Sharia is derived from two primary sources of Islamic law: the precepts set forth in the Quran, and the example set by the Islamic prophet Muhammad in the Sunnah. Fiqh jurisprudence interprets and extends the application of sharia to...
committee" to assess the compatibility of new products with Islamic lawShariaSharia law, is the moral code and religious law of Islam. Sharia is derived from two primary sources of Islamic law: the precepts set forth in the Quran, and the example set by the Islamic prophet Muhammad in the Sunnah. Fiqh jurisprudence interprets and extends the application of sharia to...
. SEO is the sole regulatory entity for the regulation and development of the capital marketCapital marketA capital market is a market for securities , where business enterprises and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets...
in Iran.
Operations
The TSE is open for trading five days a week from Saturday to Wednesday, excluding public holidays. Trading takes place through the Automated Trade Execution SystemAutomated trading system
An automated trading system is a computer trading program that automatically submits trades to an exchange.An example of an early ATS is Instinet. This allows traders to input trades invisibly to the market, with a crossing price determined by a VWAP measure...
from 9am to 12 noon, which is integrated with a clearing, settlement, depository and registry system. Settlement is T+3. The TSE is solely an order-driven market and all transactions are executed in the manner and under the principles of open auction.
Trading platform
The Tehran Stock Exchange (TSE) has started an ambitious modernization program aimed at increasing market transparencyTransparency (market)
In economics, a market is transparent if much is known by many about:* What products, services or capital assets are available.* What price.* Where....
and attracting more domestic and foreign investors. Concrete measures that have been taken in the planning and operations of the stock exchange such as the settlement system, geographical expansion, new exchange laws in order to attract local and foreign capital. The TSE has installed the new trading system which has been purchased from Atos Euronext Market Solutions (AEMS)
NYSE Technologies
NYSE Technologies is the commercial technology division of NYSE Euronext.NYSE Technologies provides comprehensive transaction, data and infrastructure services and managed solutions for buy-side, sell-side and exchange communities that require next-generation performance and expertise for mission...
in 2007.
The new system makes it possible to purchase and sell stocks on the same day. The system has also made it possible for 2,000 brokerage stations to work simultaneously, while the number was just about 480 in the past. The rise in electronic dealing, non-stop input and updated data on orders, transactions and indices are among other features of the new system. The new system has made it possible to link the stock market to the international bourses. The bourse can now handle 700 transactions per second and 150,000 transactions per day.
The trading system is an order driven system, which matches buying and selling orders of the investors. Investors can place their orders with TSE accredited brokers
Stock broker
A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...
, who enter these orders into the trading system. Then, the system automatically matches buy and sell orders of a particular security based on the price and quantity requirements. The mechanism for which the price of equities is determined is as follows:
- The best price (price priority)
- Time of order priority
Under the price priority rule, a selling (buying) order with the lowest (highest) price takes precedence. Under the time priority rule, an earlier order takes precedence over others at the same price. Thus, when the lowest sell and the highest buy orders match in price, the transaction is executed at the price. In short, the TSE market is a pure order-driven Market
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...
.
The trading system also generates and displays details of current and historical trading activity, including prices, volume
Volume
Volume is the quantity of three-dimensional space enclosed by some closed boundary, for example, the space that a substance or shape occupies or contains....
s traded and outstanding buy and sell orders. This ensures that investors have the required information to be able to take informed investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
decisions.
The range of price movements is typically restricted to 3% daily either way from last closing. Restriction on Rights
Rights issue
A rights issue is an issue of additional shares by a company to raise capital under a seasoned equity offering. The rights issue is a special form of shelf offering or shelf registration. With the issued rights, existing shareholders have the privilege to buy a specified number of new shares from...
is 6%. This can be changed in specific situation by the Board of the TSE in case of unusual price movements resulting in an extremely high or low P/E ratio
P/E ratio
The P/E ratio of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share...
. Short selling
Short selling
In finance, short selling is the practice of selling assets, usually securities, that have been borrowed from a third party with the intention of buying identical assets back at a later date to return to that third party...
is not permitted. There are no minimum trading lots. According to the Iranian Commercial Law, companies are prohibited from share repurchases. TSE Services Company (TSESC)
Tehran Stock Exchange Services Company (TSESC)
Tehran Stock Exchange Services Company is a subsidiary of the Tehran Stock Exchange . TSESC was established on June 1994 in Tehran as an independent company owned by TSE and its members...
, who is in charge of the site, supplies computer services. TSESC is a member of Association of National Numbering Agencies (ANNA).
Market segmentation
Besides the Main and Secondary Market, there is a Corporate participation certificates Market (corporate bondCorporate bond
A corporate bond is a bond issued by a corporation. It is a bond that a corporation issues to raise money in order to expand its business. The term is usually applied to longer-term debt instruments, generally with a maturity date falling at least a year after their issue date...
s). Secondary Market is an exchange facility where the listed securities of small and mid-size companies can be traded efficiently and competitively. Any company, domestic or foreign, can list their products on the exchange for as long as they meet the listing criteria. The value of three markets of Securities and Stock Exchange, Over-the-Counter (OTC) stock exchange and commodity exchange hit $100 billion in December 2010. In 2010, the Kish Stock Exchange
Kish Stock Exchange
Kish Stock Exchange was launched in 2010. It is a stock exchange located in the Iranian island of Kish. Kish island is a free trade zone....
was launched to facilitate foreign investment
Foreign Direct Investment in Iran
Foreign direct investment in Iran has been hindered by unfavorable or complex operating requirements and by international sanctions, although in the early 2000s the Iranian government liberalized investment regulations. Iran ranks 62nd in the World Economic Forum's 2011 analysis of the global...
and monetary activities in Kish Island free trade zone.
| Description | Main Board | Secondary Board | Secondary Market |
|---|---|---|---|
| Minimum Capital (billion IRR Iranian rial The rial is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting.... ) |
200,000 | 100,000 | 30,000 |
| Minimum Shareholders | 1000 | 750 | 250 |
| Free Float (%) | 20 | 10 | 15 |
| Minimum Term of Operation (Years) | 3 | – | – |
| Profitability (Years) | 3 | 2 | 1 |
| Equity to Asset Ratio (%) | 30 | 20 | 15 |
| Market Maker Market maker A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. From a market microstructure theory standpoint, market makers are net sellers of an option to be... s |
Selective | Selective | Mandatory |
TSE rate
Iranian rial
The rial is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting....
known as the "TSE rate". In 2002 the "official rate" was abolished, and the TSE rate became the basis for the new unified foreign exchange
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
regime.
OTC market
Since 2009, Iran has been developing an over-the-counterOver-the-counter (finance)
Within the derivatives markets, many products are traded through exchanges. An exchange has the benefit of facilitating liquidity and also mitigates all credit risk concerning the default of a member of the exchange. Products traded on the exchange must be well standardised to transparent trading....
(OTC) market for bonds and equities (aka Farabourse). Its shareholders include the Tehran Stock Exchange
Corporation (20%), several banks, insurance companies and other financial institutions (60%), and private and institutional shareholders (20%).
Brokers
Trading takes place through licensed private brokers registered with the Securities and Exchange Organization of Iran. Thirty-one of the 88 brokerages active in the TSE are licensed to trade the futures contracts. The leverageLeverage (finance)
In finance, leverage is a general term for any technique to multiply gains and losses. Common ways to attain leverage are borrowing money, buying fixed assets and using derivatives. Important examples are:* A public corporation may leverage its equity by borrowing money...
for futures contracts is set at 1-to-10. TSE will only deal in the derivatives
Derivative (finance)
A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.Under U.S...
through electronic trading
Electronic trading
Electronic trading, sometimes called etrading, is a method of trading securities , foreign exchange or financial derivatives electronically...
.
Every year Tehran Stock Exchange ranks the brokers regarding their performance during one year. for the past four years (2007, 2008, 2009, 2010) Mofid Securities Company has been ranked the 1st.
Electronic trading
Starting March 2011, investors will be able to trade in the Iranian stock market through the InternetInternet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
from anywhere in the world (on a trial basis since July 2010), or get all the necessary information before traveling to Iran. There are 87 online service providers which offer round-the-clock information and services about Iran and its stock market. As of September 2011, 40,000 shareholders are registered and conducting transactions online.
Trading fees
As of July 2010, trading fees include:- Equities and rights: 0.55% payable by the sellers and 0.5% the buyers.
- Participation bonds: 0.1% of transaction value payable by both the buyer and seller with a maximum of 100 million IRRIranian rialThe rial is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting....
.
New products and services
Presently, TSE trades mainly in securities offered by listed companies. Equities and Corporate BondsBond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
are being traded at TSE at the moment. The plan is to introduce other financial instruments
Financial instruments
A financial instrument is a tradable asset of any kind, either cash; evidence of an ownership interest in an entity; or a contractual right to receive, or deliver, cash or another financial instrument....
in the near future. The introduction of project-based participation certificates that bear a fixed annual return during the period of the project and promise the final settlement of the profit
Profit (accounting)
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...
at the date of its completion, has diversified the market.
Futures
In 2008, commodity Futures came onto the Iran Mercantile ExchangeIran Mercantile Exchange
Iran Mercantile Exchange is a commodity exchange located in Tehran, Iran. It was founded in 2006. IME trades in agricultural, industrial and petrochemical products in the spot and futures markets...
(IME). In July 2010, TSE introduced six single-stock futures contract
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
s based on Parsian Bank
Parsian Bank
Parsian Bank is Iran's largest private bank, headquartered in Tehran, Iran. Founded in February, 2002 as a nongovernmental bank, Parsian Bank now has 174 branches across Iran, 104 of which are in Tehran. The bank entered the Tehran Stock Exchange in 2004...
and Karafarin Bank, which will expire in two, four and six months. Thirty-one of the 88 brokerages active in the TSE are licensed to trade the futures contracts. The leverage
Leverage (finance)
In finance, leverage is a general term for any technique to multiply gains and losses. Common ways to attain leverage are borrowing money, buying fixed assets and using derivatives. Important examples are:* A public corporation may leverage its equity by borrowing money...
for futures contracts is set at 1-to-10. TSE will only deal in the derivatives
Derivative (finance)
A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.Under U.S...
through electronic trading
Electronic trading
Electronic trading, sometimes called etrading, is a method of trading securities , foreign exchange or financial derivatives electronically...
.
Outlook
| TSE projects (as of 2009) | Status (as of July 2010) |
|---|---|
| Continuation of privatization plan Privatization in Iran According to the Fourth Five-Year Economic Development Plan , the Privatization Organization of Iran affiliated to the Ministry of Economic Affairs and Finance is in charge of setting prices and ceding shares to the general public and on the Tehran Stock Exchange... and IPOs Initial public offering An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises... of state-owned companies. |
Iran has privatized $63 billion worth of equity since 2005. Government's ownership in GDP down to 40% as of November 2009 (from 80% in 2005). More information: Privatization in Iran. |
| Increasing liquidity in securities market with a review on trading regulations. | New bylaw to facilitate foreign portfolio investment Foreign portfolio investment In economics, foreign portfolio investment is the entry of funds into a country where foreigners make purchases in the country’s stock and bond markets, sometimes for speculation.... was ratified by the Council of Ministers Cabinet of Iran The Cabinet of Iran is a formal body composed of government officials, ministers, chosen and led by a President. Its composition must be approved by a vote in the Parliament... in April 2010. Since then, as an incentive to investment in Iran, foreign investors in TSE are tax-exempt. |
| Launching derivatives market Derivatives market The derivatives market is the financial market for derivatives, financial instruments like futures contracts or options, which are derived from other forms of assets.... and introducing stock futures and options Option (finance) In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the... . |
In July 2010, TSE introduced six single-stock futures contract Futures contract In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange... s, based on 2 companies which will expire in two, four and six months. Plan to increase coverage to 10 companies by March 2011. No update on exchange traded funds, Gold ETF and options trading but their offering is planned. Futures on indices: Expected by 2011. |
| Establishing Islamic bonds and products such as Sukuk Sukuk Sukuk is the Arabic name for financial certificates, but commonly refers to the Islamic equivalent of bonds. Since fixed income, interest bearing bonds are not permissible in Islam, Sukuk securities are structured to comply with the Islamic law and its investment principles, which prohibits the... and Islamic Islamic banking Islamic banking is banking or banking activity that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees for loans of money... Mortgage-Backed Securities Mortgage-backed security A mortgage-backed security is an asset-backed security that represents a claim on the cash flows from mortgage loans through a process known as securitization.-Securitization:... (MBS), based on market development act and tax exemption. |
Sukuk Sukuk Sukuk is the Arabic name for financial certificates, but commonly refers to the Islamic equivalent of bonds. Since fixed income, interest bearing bonds are not permissible in Islam, Sukuk securities are structured to comply with the Islamic law and its investment principles, which prohibits the... and options are the next instruments to be available. Profit and awards accrued on participation papers are tax exempt. See also: (OTC) Bond market in Iran. |
| Enactment of anti-money laundering laws. | See: Anti-money laundering laws in Iran. |
| Setting up required mechanisms for tracking frauds and claiming against breach of market law. | TSE has an electronic system for tracing market abuse and insider trading Insider trading Insider trading is the trading of a corporation's stock or other securities by individuals with potential access to non-public information about the company... . See also: Iran Securities and Exchange Commission. |
| Creating efficient corporate governance Corporate governance Corporate governance is a number of processes, customs, policies, laws, and institutions which have impact on the way a company is controlled... and investor relations Investor relations Investor Relations is a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a... frameworks. |
In 2006, the TSE introduced more stringent reporting and disclosure requirements for listed companies and enforcement measures for non-compliance. KPMG KPMG KPMG is one of the largest professional services networks in the world and one of the Big Four auditors, along with Deloitte, Ernst & Young and PwC. Its global headquarters is located in Amstelveen, Netherlands.... and PriceWaterhouseCoopers PricewaterhouseCoopers PricewaterhouseCoopers is a global professional services firm headquartered in London, United Kingdom. It is the world's largest professional services firm measured by revenues and one of the "Big Four" accountancy firms.... have suspended their operations in Iran because of international sanctions Sanctions against Iran This article outlines economic, trade, scientific and military sanctions against Iran, which have been imposed by the U.S. government, or under U.S. pressure by the international community through the United Nations Security Council... . See also: Accounting standards in Iran |
| Facilitating and expanding market access by means of developing brokerage network Prime brokerage Prime brokerage is the generic name for a bundled package of services offered by investment banks and securities firms to hedge funds and other professional investors needing the ability to borrow securities and cash to be able to invest on a netted basis and achieve an absolute return... , e-trading Electronic trading Electronic trading, sometimes called etrading, is a method of trading securities , foreign exchange or financial derivatives electronically... and DMA Direct Market Access Direct market access ' is a term used in financial markets to describe electronic trading facilities that give investors wishing to trade in financial instruments a way to interact with the order book of an exchange. Normally, trading on the order book is restricted to broker-dealers and market... . |
E-trading is possible since July 2010 on trial basis and will be offered to the general public starting March 2011. Mobile Phone-Based Trading planned later in 2011. There are 87 online service provider Online service provider An online service provider can for example be an internet service provider, email provider, news provider , entertainment provider , search, e-shopping site , e-finance or e-banking site, e-health site, e-government site, Wikipedia, Usenet... s which offer round-the-clock information and services Financial data vendor A financial data vendor provides data to financial firms, traders, and investors. The data distributed is collected from sources such as a stock exchange feeds, brokers and dealer desks or regulatory filings .- Background :... about Iran and its stock market. See also: Tehran Stock Exchange Services Company (TSESC) Tehran Stock Exchange Services Company (TSESC) Tehran Stock Exchange Services Company is a subsidiary of the Tehran Stock Exchange . TSESC was established on June 1994 in Tehran as an independent company owned by TSE and its members... . |
| Economic calendar Economic calendar Economic calendars calendar inform financiers and traders about scheduled major economic indicator releases , government reports and speeches of influential persons of the financial world. Economic calendars are usually issued on an weekly basis and updated in real time.-External links:****... and market data Market data In finance, market data is quote and trade-related data associated with equity, fixed-income, financial derivatives, currency, and other investment instruments. Market data is numerical price data, reported from trading venues, such as stock exchanges... . |
Real-time data available: Bid/Ask Prices, Indices, Companies Announcements, Trading Volume and Value through the TSE website and a system named "CODAL" (free of charge). |
| Promoting the shareholding culture in Iran. | The Government is running financial literacy Financial literacy Financial literacy is the ability to understand finance. More specifically, it refers to the set of skills and knowledge that allows an individual to make informed and effective decisions through their understanding of finances... training programs in the society. See also: "Justice Shares" in Iran. |
Economic sectors
2007: There were 324 companies listed on the TSE with a total market capitalizationMarket capitalization
Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...
(MC) of US$42,452 million. Close to 60% of the MC relates to listed companies from the following sectors:
- Basic Metals,
- Motor Vehicles and Trailers,
- Chemicals and By-ProductsNational Iranian Petrochemical CompanyThe National Iranian Petrochemical Company , a subsidiary to the Iranian Petroleum Ministry, is owned by the government of the Islamic Republic of Iran. It is responsible for the development and operation of the country's petrochemical sector. Founded in 1964, NIPC began its activities by operating...
, - Non-Metallic Minerals Products.
A total of 161 companies from these sectors are listed on the TSE, which translates to 49.7% of total companies listed. Largest stocks include:
- Mobarakeh Steel Co. with MC of US$3,218 million, which translates to 7.6% of MC,
- National Iranian Copper Industries CompanyIMIDROIranian Mines and Mining Industries Development and Renovation Organization is a major holding company active in the mining sector in Iran...
(PersianPersian languagePersian is an Iranian language within the Indo-Iranian branch of the Indo-European languages. It is primarily spoken in Iran, Afghanistan, Tajikistan and countries which historically came under Persian influence...
: Sanaye Mese Iran) at 6.8% of MC, - Saipa Co.SAIPASaipa is the second largest Iranian auto manufacturer.Saipa was established in 1966, with 75% Iranian ownership, to assemble Citroëns under license for the Iranian market...
at 5.3% of MC.
2008: other companies in the top spots included:
- Gol-Gohar Iron Ore Company ($2.1 billion MC),
- Chadormalu Mining and Industrial CompanyChadormalu Mining and Industrial CompanyChadormalu Mining and Industrial Company was established in June 1992 in Tehran, Iran.CMIC is the main iron ore concentrate producer by direct reduction in the Middle East with 7 million ton/year and produces up to 1,000,000 ton/year of crushed iron ore for blast furnaces and...
($2 billion), - Kharg Petrochemical CompanyNational Iranian Petrochemical CompanyThe National Iranian Petrochemical Company , a subsidiary to the Iranian Petroleum Ministry, is owned by the government of the Islamic Republic of Iran. It is responsible for the development and operation of the country's petrochemical sector. Founded in 1964, NIPC began its activities by operating...
(over $1 billion), - Ghadir petrochemicalGhadir Investment CompanyGhadir Investment Company was established in 1991 in Iran. Its activities range from managing or restructuring Iranian companies on behalf of its parent company, Saderat Bank of Iran. GHADIR is one of the largest listed companies on the Tehran Stock Exchange with a market capitalization in excess...
companies (over $1 billion), - Khuzestan Steel CompanyIMIDROIranian Mines and Mining Industries Development and Renovation Organization is a major holding company active in the mining sector in Iran...
(over $1 billion), - Power Plant Projects Management Company (MAPNA)MAPNAMAPNA Group is a group of Iranian companies involved in construction and installation of energy production machinery, including boilers, gas and steam turbines, electrical generators, as well as industrial scale petroleum processing installations, railway locomotives and wind power...
(over $1 billion), - Retirement Investment Firm (over $1 billion),
- Iran Khodro Industrial Group (over $1 billion),
- Metal and Mine Investment Companies (over $1 billion).
This indicates that the capital market
Capital market
A capital market is a market for securities , where business enterprises and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets...
in Tehran
Tehran
Tehran , sometimes spelled Teheran, is the capital of Iran and Tehran Province. With an estimated population of 8,429,807; it is also Iran's largest urban area and city, one of the largest cities in Western Asia, and is the world's 19th largest city.In the 20th century, Tehran was subject to...
is heavily concentrated on four economic sectors with companies that make up nearly half of the total listed companies on the exchange. While 163 companies listed are spread out amongst 26 sectors, with the "Food and Beverages Sector" alone accounts to 32 companies at a market capitalization of US$897.5 million. Studies show that in 2008 about 30 firms, involved in 11 industries, hold close to 75% of shares in Tehran Stock Exchange.
2009: A comparison of the top 100 Iranian companies and the Fortune 500
Fortune 500
The Fortune 500 is an annual list compiled and published by Fortune magazine that ranks the top 500 U.S. closely held and public corporations as ranked by their gross revenue after adjustments made by Fortune to exclude the impact of excise taxes companies collect. The list includes publicly and...
in 2009 indicated that the gross profit margins of the top 100 Iranian companies were almost double those of the Fortune 500. For Fortune 500 companies, the average gross profit margin was 6.9% and for the Iranian companies, it was 13%. The sector with the highest profit margin
Profit margin
Profit margin, net margin, net profit margin or net profit ratio all refer to a measure of profitability. It is calculated by finding the net profit as a percentage of the revenue.Net profit Margin = x100...
among the top 100 Iranian companies in 2009 is mining, with a margin of 58%. The mining companies in the Fortune 500 had a gross profit margin of 11%. After mining, other industries with highest margins are base metals, and telecommunications.
| Name | Market Cap. (million $) | % of Total MC | |
|---|---|---|---|
| 1. | Iran Telecommunication Co. Telecommunication Company of Iran Telecommunication Company of Iran was established in 1971 with a new organizational structure as the main responsible administration for the entire telecommunication affairs, and Iran Telecommunication Industries was also founded in the same year to manufacture the required equipment for the... |
9,005.8 | 13.22 |
| 2. | Isfahan Mobarakeh Steel Co. Mobarakeh Steel Company Mobarakeh Steel Company is an Iranian steel company, located 65 km south west of Esfahan, near the city of Mobarakeh, Esfahan Province, Iran. It is Iran's largest steel maker, and one of the largest industrial complexes operating in Iran. It was first commissioned after the Iranian... |
3,641.4 | 5.35 |
| 3. | National Copper Ind.Co. IMIDRO Iranian Mines and Mining Industries Development and Renovation Organization is a major holding company active in the mining sector in Iran... |
3,586.56 | 5.27 |
| 4. | MAPNA MAPNA MAPNA Group is a group of Iranian companies involved in construction and installation of energy production machinery, including boilers, gas and steam turbines, electrical generators, as well as industrial scale petroleum processing installations, railway locomotives and wind power... |
2,617.14 | 3.84 |
| 5. | Chadurmalu Chadormalu Mining and Industrial Company Chadormalu Mining and Industrial Company was established in June 1992 in Tehran, Iran.CMIC is the main iron ore concentrate producer by direct reduction in the Middle East with 7 million ton/year and produces up to 1,000,000 ton/year of crushed iron ore for blast furnaces and... |
2,514.36 | 3.69 |
| 6. | Saipa SAIPA Saipa is the second largest Iranian auto manufacturer.Saipa was established in 1966, with 75% Iranian ownership, to assemble Citroëns under license for the Iranian market... |
2,102.22 | 3.09 |
| 7. | Saderat Bank Bank Saderat Iran Bank Saderat Iran is an Iranian Bank. Its name means "the Export Bank of Iran". Bank Saderat Iran was founded by the prominent Mofarrah and Bolurfrushan families, commenced operation on 13 November 1952 with a board of three directors and 20 employees... |
2,064.51 | 3.03 |
| 8. | Mellat Bank Bank Mellat Bank Mellat is a Private Iranian bank. Its name means "Bank of the Nation". Bank Mellat was established in 1980, with a paid of capital of Rials 33.5bn as a merger of ten pre-revolution private banks comprising: Tehran, Dariush, Pars, Etebarat Taavoni & Tozie, Iran & Arab, Bein-al-melalie-Iran,... |
2,024.42 | 2.97 |
| 9. | Parsian Bank Parsian Bank Parsian Bank is Iran's largest private bank, headquartered in Tehran, Iran. Founded in February, 2002 as a nongovernmental bank, Parsian Bank now has 174 branches across Iran, 104 of which are in Tehran. The bank entered the Tehran Stock Exchange in 2004... |
1,942 | 2.85 |
| 10. | Isfahan Oil Refinery Co. | 1,907.42 | 2.80 |
| Total of Market | 68,117.57 | 46.11 |
2011: The best performing industries in 2011, in terms of total sales, were the banking and automotive sectors. The worst performers were home appliances and electronics. In terms of gross profit margin, mining
Mining in Iran
Mining in Iran is under-developed. Yet the country is one of the most important mineral producers in the world, ranked among 15 major mineral rich countries, holding some 68 types of minerals, 37 billion tonnes of proven reserves and more than 57 billion tonnes of potential reservoirs....
, telecommunications
Communications in Iran
Iran’s telecommunications industry is almost entirely state-owned, dominated by the Telecommunication Company of Iran . Fixed-line penetration in 2004 was relatively well-developed by regional standards, standing at 22 lines per 100 people, higher than Egypt with 14 and Saudi Arabia with 15,...
, and oil and gas exploration & production
Petroleum industry in Iran
In 2004 Iran produced 5.1 percent of the world’s total crude oil , which generated revenues of US$25 billion to US$30 billion and was the country’s primary source of foreign currency. At 2006 levels of production, oil proceeds represented about 18.7 percent of gross domestic product . However, the...
were the best performing industries. Sales totals of the top 100 Iranian companies on the list ranged from $12.8 billion or the top ranking company, Iran Khodro
Iran Khodro
Iran Khodro Company, also known as IKCO, is the leading Iranian automaker with headquarters in Tehran. The company's original name was Iran National. IKCO was founded in 1962 and it produced 688,000 passenger cars in 2009...
, to $318 million for the 100th company.
Market participants
The Government of Iran directly holds 35 percent of the TSE, while securing another 40 percent through pension funds and investment companies such as the Social Security Investment CompanySocial Security Organization (Iran)
Social Security Organization is a social insurer organization in Iran which provides coverage of wage-earners and salaried workers as well as voluntary coverage of self-employed persons...
, one of the largest institutional investors on the TSE. Bonyad
Bonyad
Bonyads are charitable trusts in Iran that play a significant role in Iran's non-petroleum economy, controlling an estimated 20% of Iran's GDP. Exempt from taxes, they have been called "bloated", and "a major weakness of Iran’s economy", and criticized for reaping "huge subsidies from government",...
s also play a leading role in TSE trading. In 2005 fewer than 5 percent of Iranians owned stock.
The Government is promoting the shareholding culture in Iran. By March 2010, 3.219 million shareholders had registered in the TSE, with investment firms having 562,375 shareholders, which makes it the "favorite industry" in the stock market. By September 2011, the number of registered shareholders in the TSE had increased to 4.5 million.
Mutual funds
As of 2009, 21 mutual fundMutual fund
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :...
s managed by permitted brokerage firms and investment banks are investing in the TSE according to the investment funds regulation. Mutual funds are open ended and their operation permission is issued by the Iran Securities and Exchange Organization (SEO). Since then, 41 funds have been established, four of which are fixed income
Fixed income
Fixed income refers to any type of investment that is not equity, which obligates the borrower/issuer to make payments on a fixed schedule, even if the number of the payments may be variable....
funds and the remainder of which are equity funds. As of August 2010, total assets under management
Assets under management
Assets under management is a financial term used denote the market value of funds being managed by a financial instutition on behalf of its clients, investors, depositors, etc. This metric is a sign of size and success against competition...
within the Iranian fund management industry amount to approximately $230 million with great potential for development.
Indices
• TSE All-Share Price Index (TEPIX)• TSE Dividend & Price "total return
Total return
The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees...
" Index (TEDPIX)
• TSE All-Share FF adjusted (TEFIX)
• TSE Cash Dividend Index (TEDIX)
• TSE-50
• Each industry (sector) Index
• Industrial Index
• Financial Index
• Each Company Index (based on Price & Volume)
In 1990, the All-Shares Price Index (TEPIX) was introduced to the market as the main indicator of share price movements.TEPIX is a weighted market value of all share prices appearing on the TSE Board and is measured every two minutes. In addition to the TEPIX, daily price indices of shares of each company, each sector, and the "Top Fifty" most active companies (TSE-50) are computed.
| No. Shares Traded (million) | Daily Average Turnover (million $) |
|
|---|---|---|
| July-09 | 20,256 | 100.7 |
| Aug-09 | 5,747 | 53.9 |
| Sep-09 | 3,202 | 35.8 |
| Oct-09 | 4,669 | 56.7 |
| Nov-09 | 26,675 | 436.3 |
| Dec-09 | 1,547 | 19.8 |
| Jan-10 | 3,228 | 30.5 |
| Feb-10 | 4,315 | 57.6 |
| Mar-10 | 2,229 | 28.9 |
| Apr-10 | 5,294 | 67.1 |
| May-10 | 21,563 | 125.9 |
| June-10 | 17,837 | 112.7 |
| 116,562 (total) | 93.83 (average) |
Performance
2000–2004: The performance of the TSE has had no correlationCorrelation
In statistics, dependence refers to any statistical relationship between two random variables or two sets of data. Correlation refers to any of a broad class of statistical relationships involving dependence....
with major exchanges or emerging stock markets over the past few years and not even with the oil price. While the overall indices of the world’s five major exchanges – New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
, London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
, Paris
Paris
Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region...
, Frankfurt
Frankfurt
Frankfurt am Main , commonly known simply as Frankfurt, is the largest city in the German state of Hesse and the fifth-largest city in Germany, with a 2010 population of 688,249. The urban area had an estimated population of 2,300,000 in 2010...
and Tokyo
Tokyo
, ; officially , is one of the 47 prefectures of Japan. Tokyo is the capital of Japan, the center of the Greater Tokyo Area, and the largest metropolitan area of Japan. It is the seat of the Japanese government and the Imperial Palace, and the home of the Japanese Imperial Family...
plunged by 40 to 70% between March 2001 and April 2003, the TSE index (Tepix) bucked the trend by going up nearly 80%.
2005–2006: In December, 2005, 419 companies with a market capitalization of IRR
Iranian rial
The rial is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting....
32,741.7 million were listed in TSE. The TSE has had an exceptional performance over the past 5 years. In general, the stock market in 2005/06 shed value as it is manifested by the decline of its major stock price indices. The TSE price index (TSPIX) at the end of 2005/06, declined by 21.9%, while the Financial Sector Index, and the Industrial Index, declined by, 38.8%, 19.4% respectively, and the Dividend
Dividend
Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be distributed to...
Index gained 11.8%, mostly due to a reported 100 billion USD capital flight
Capital flight
Capital flight, in economics, occurs when assets and/or money rapidly flow out of a country, due to an economic event and that disturbs investors and causes them to lower their valuation of the assets in that country, or otherwise to lose confidence in its economic...
from the country because of the international dispute
Sanctions against Iran
This article outlines economic, trade, scientific and military sanctions against Iran, which have been imposed by the U.S. government, or under U.S. pressure by the international community through the United Nations Security Council...
surrounding the Iranian nuclear programme.
2007: The market bottomed in June 2007 mainly because of the renewed privatization
Privatization in Iran
According to the Fourth Five-Year Economic Development Plan , the Privatization Organization of Iran affiliated to the Ministry of Economic Affairs and Finance is in charge of setting prices and ceding shares to the general public and on the Tehran Stock Exchange...
drive in the Iranian economy.
2008: The TSE was not directly affected by the international financial turmoil in 2008, but following the global reduction in prices of copper and steel, the bourse index dropped by 12.5 percent, as most of the companies listed on the exchange are producers of such commodities. TSE experienced an 11% growth at the end of 2008 and ranked second in the world in terms of increase in the volume of trade after Luxembourg’s Bourse.
2009: The TSE sank about 40% in value between August 2008 and March 2009, influenced by falling oil prices and declining markets in other parts of the world. As of August 1, 2009 it has recovered by more than 10%. During Iranian year 2009/10, the value of capital market was around $20 billion. Some 3 million trade exchanges were made, pushing up the index to 12,500 units from the previous 8,000 units.
2010: In the first month of Iranian 2010
Iranian calendar
The Iranian calendars or sometimes called Persian calendars are a succession of calendars invented or used for over two millennia in Greater Iran...
(March 20 – April 21, 2010), the index hit the 14,000 unit mark, up from the previous 12,500, showing 12 percent growth. The value of one month's trading transactions exceeded $1 billion against the previous year's corresponding period of $95 million. Tehran Stock Exchange bourse index from June 2009 to 2010 grew 55 percent and the value of TSE's total market capitalization
Market capitalization
Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...
went up about 33 percent, to over $71 billion.
On August 2, 2010, the TSE main index (TEPIX) reached a record level of 16,056 points, despite US-sponsored sanctions against Iran
Sanctions against Iran
This article outlines economic, trade, scientific and military sanctions against Iran, which have been imposed by the U.S. government, or under U.S. pressure by the international community through the United Nations Security Council...
. Thus, TEDPIX became the world’s second-best performing equity index. Factors such as the global spike in oil and metal prices, government support for industries and oil sectors as well as the growth of stock market liquidity flow contributed to the boom. Experts commented that the growth was also partly due to a government decision to sell off 20 percent of its equity in two major automakers. Given the relative low market valuation
P/E ratio
The P/E ratio of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share...
of TSE stocks in 2010, the upward trend was expected to continue over the long run, rather than being a bubble
Stock market bubble
A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation....
. TEPIX reached a new record on September 18, 2010, when it hit 18,658, up from 11,295 at the start of the year. As of December 2010, the TSE index rose about 64 percent since the start of 2010. The Tehran Stock Exchange has been ranked as the best bourse index in Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
, Africa and Middle East in 2010 in terms of performance of the main index.
2011: On February 1, 2011, TEPIX and total market value
Market capitalization
Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...
reached an all-time high of 21,349 and USD 100 billion respectively. An alleged $200 million investments by Iranian expats
Iranian citizens abroad
The term Iranians abroad or Iranian diaspora refers to the Iranian people born in Iran but living outside of Iran with their children.As of 2010, there are an estimated four to five million Iranians living abroad, mostly in North America, Europe, Persian Gulf States, Turkey, Australia and the...
also contributed to this increase.
On April 9, 2011, TSE's main index (TEPIX) hit a new all-time record high at 26,222 over a boost from the stocks of metal and shipping industries
Industry of Iran
According to a report by the Economist, Iran has been ranked 39th for producing $23 billion of industrial products in 2008. From 2008 to 2009 Iran has leaped to 28th place from 69th place in annual industrial production growth rate. A recent report by the World Fact Book ranks Iran 3rd among...
. According to the World Federation of Exchanges
World Federation of Exchanges
The World Federation of Exchanges , formerly FIBV - Federation Internationale des Bourses de Valeurs , is an international organization for securities and derivative markets such as stock exchanges....
(WFE), TSE had the best performance among WFE member exchanges from May 2010 to May 2011. With a staggering 79% growth rate in its main index, the TSE ranked 1st in WFE’s “Broad Stock Index Performance” category followed by the Colombo
Colombo Stock Exchange
The Colombo Stock Exchange is the main stock exchange in Sri Lanka. It is one of the most modern exchanges in South Asia, providing a fully automated trading platform...
and Lima Stock Exchanges with 75.1% and 48.9% rates respectively.
Taxes
As of July 2010, taxes on TSE transactions are as follows:- Cash dividend: none (22.5% at source from Company).
- Share transfersTransfer taxA transfer tax is a tax on the passing of title to property from one person to another.In a narrow legal sense, a transfer tax is essentially a transaction fee imposed on the transfer of title to property. This kind of tax is typically imposed where there is a legal requirement for registration of...
: the Tax Amendment has changed the regulations regarding calculation of tax on transfer of shares and their rights in Iranian corporate entities.- In the case of shares listed on the Tehran Stock Exchange (TSE) the tax on transfer of such shares and other rights is 0.5 per cent of the sales price.
- In the case of transfer of the shares and their rights to other corporate entities (i.e. those not listed on the TSE) a flat rate of four per cent of value of the shares and rights transferred applies. No other taxes will be charged. The Amendment has removed the requirement to value the shares in this category.
Exemptions
- Capital gainCapital gainA capital gain is a profit that results from investments into a capital asset, such as stocks, bonds or real estate, which exceeds the purchase price. It is the difference between a higher selling price and a lower purchase price, resulting in a financial gain for the investor...
: no tax. - Interest income: no tax.
- Participation papers: Profit and awards accrued are tax exempt.
- Listed companiesPublic companyThis is not the same as a Government-owned corporation.A public company or publicly traded company is a limited liability company that offers its securities for sale to the general public, typically through a stock exchange, or through market makers operating in over the counter markets...
: 10% tax exemption, companies holding 20% free float shares are provided 20% tax exemption. - Foreign investorsForeign portfolio investmentIn economics, foreign portfolio investment is the entry of funds into a country where foreigners make purchases in the country’s stock and bond markets, sometimes for speculation....
: Foreign investors in TSE are tax-exempt.
Growth potential
According to experts, the economy of IranEconomy of Iran
The economy of Iran is the eighteenth largest in the world by purchasing power parity and according to Iranian officials' claims is going to become the 12th largest by 2015. The economy of Iran is a mixed and transition economy with a large public sector and some 50% of the economy centrally planned...
has many investment opportunities, particularly on its stock exchange. The Central Bank of Iran indicate that 70 percent of the Iranians own homes with huge amounts of idle money entering the housing market. However, if the stock market grows stronger, it will undoubtedly attract idle capital. In terms of investment, the domestic rival markets of the bourse are the Iranian real estate market, gold
Gold Market
The Gold Market is a narrow covered passageway located in the old quarter of Gaza; it is both a center for trading and buying gold, and location for foreign exchange. The Market lies along the southern edge of the Great Mosque of Gaza, beside the main Omar Mukhtar Street...
and car. According to Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
, Iran is forecast to reach the highest economic growth between 2015 and 2025 and join the world's largest economies
Next Eleven
The Next Eleven are eleven countries—Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, and Vietnam — identified by Goldman Sachs investment bank and Jim O'Neill as having a high potential of becoming, along with the BRICS, the world's largest...
(world's 12th economy by 2025).
Market valuation
In 2007, the market, with a capitalization of $37 billion was trading at a fraction of the earnings multiplesP/E ratio
The P/E ratio of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share...
enjoyed by Iran's neighbours, while average earnings continued to grow at about 25 per cent a year. As of 2010, the price-to-earnings
P/E ratio
The P/E ratio of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share...
rate in Iran's market stands at around six while it is 15 in regional markets. With the removal of obstacles to foreign investment
Foreign Direct Investment in Iran
Foreign direct investment in Iran has been hindered by unfavorable or complex operating requirements and by international sanctions, although in the early 2000s the Iranian government liberalized investment regulations. Iran ranks 62nd in the World Economic Forum's 2011 analysis of the global...
Iran could potentially have a 2,000–3,000 billion US dollar stock exchange market. Due to the price gains the average dividend yield
Dividend yield
The dividend yield or the dividend-price ratio on a company stock is the company's total annual dividend payments divided by its market capitalization, or the dividend per share, divided by the price per share. It is often expressed as a percentage...
has fallen from 16 per cent in 2009 to 13 per cent in 2010.
Privatization
In recent years, the role of the private sector has been further on the increase. Furthermore, an amendmentConstitutional amendment
A constitutional amendment is a formal change to the text of the written constitution of a nation or state.Most constitutions require that amendments cannot be enacted unless they have passed a special procedure that is more stringent than that required of ordinary legislation...
of the article 44 of the Iranian Constitution in 2004 has allowed 80% of state assets to be privatized, 40% of which will be conducted through the "Justice Shares" scheme and the rest through the Bourse Organization. The government will keep the title of the remaining 20%.
Under the privatization plan
Privatization in Iran
According to the Fourth Five-Year Economic Development Plan , the Privatization Organization of Iran affiliated to the Ministry of Economic Affairs and Finance is in charge of setting prices and ceding shares to the general public and on the Tehran Stock Exchange...
, 47 oil and gas companies (including PetroIran and North Drilling
North Drilling
North Drilling Company is an Iranian company specialized in the contracting, design, construction, management and leasing of oil and gas platforms in the Caspian Sea, to global customers. The company was privatized in June 2009...
Company) worth an estimated $90 billion are to be privatized on the Tehran Stock Exchange by 2014.
Foreign investors can bid in Iranian privatization
Privatization in Iran
According to the Fourth Five-Year Economic Development Plan , the Privatization Organization of Iran affiliated to the Ministry of Economic Affairs and Finance is in charge of setting prices and ceding shares to the general public and on the Tehran Stock Exchange...
tenders, but need permission from the Economy Ministry
Ministry of Economic Affairs and Finance (Iran)
The Ministry of Economic Affairs and Finances function are:*acting as the state treasury,*public finance,*economic and financial policy making,*implementing tax policies,*in charge of foreign direct investment,...
on a case-by-case basis. The government has reduced the bureaucratic channels and issues investment permits for foreign nationals in less than seven days.
Iran has announced it will begin to allow foreign firms to purchase Iranian state-run companies, with the possibility of obtaining full ownership.
Iranian expatriates
There are differing estimates of the expatriates’ total capital (1.3 trillion dollars), but what is clear is that it is so huge that it will be enough to buy shares of all state companies. In DubaiDubai
Dubai is a city and emirate in the United Arab Emirates . The emirate is located south of the Persian Gulf on the Arabian Peninsula and has the largest population with the second-largest land territory by area of all the emirates, after Abu Dhabi...
alone, Iranian expatriates
Iranian citizens abroad
The term Iranians abroad or Iranian diaspora refers to the Iranian people born in Iran but living outside of Iran with their children.As of 2010, there are an estimated four to five million Iranians living abroad, mostly in North America, Europe, Persian Gulf States, Turkey, Australia and the...
are estimated to have invested up to $200 billion. If 10 percent of this capital arrives, things will change drastically in Iran
Iran
Iran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...
. In 2000, the Iran Press Service reported that Iranian expatriates had invested between $200 and $400 billion in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
, and China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
, but almost nothing in Iran. FIPPA provisions apply to all foreign investors, and many Iranian expatriates based in the US continue to make substantial investments in Iran.
Foreign portfolio investment
So far, the Tedpix index has been driven by domestic investors, including wealthy Iranians, public sector pension funds and the investment arms of state-owned banks. For the index to prosper in the long run, more foreign investors need to make significant share purchases. As at 2009, foreign portfolio investmentForeign portfolio investment
In economics, foreign portfolio investment is the entry of funds into a country where foreigners make purchases in the country’s stock and bond markets, sometimes for speculation....
accounts for only about 2 percent of the stock market in Iran.
The new by-law on foreign portfolio investment was approved by the government in June 2005, but ratified by the Council of Ministers
Cabinet of Iran
The Cabinet of Iran is a formal body composed of government officials, ministers, chosen and led by a President. Its composition must be approved by a vote in the Parliament...
in April, 2010. Under this new bylaw, foreign investors can participate in the TSE for the first time. Initially, however, some limitations had been imposed on foreign investors:
- Foreign investors may own a maximum of 10 percent of each listed company.
- Foreign investors may not withdraw their main capital and capital gain for the first three years of their investment. Repatriation is possible once a year under current regulations.
With the new law, Iran has increased the ceiling on foreign participation to 20% and foreign investors can now invest in the capital market, trade shares (including OTC) and:
- for small-scale (foreign) investors, take out their money at any time;
- for large-scale investors which possess 10 percent of the agency's value or 10 percent of the management position, can take their capital out of the country after two years upon receiving permission from the government.
Exchange currencies
Since April 2010, foreign investors have been able to open foreign-currencyForeign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
accounts at Iranian banks and exchange their currencies to rials
Iranian rial
The rial is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting....
and vice-versa. Foreigners who want to trade in Iran must get a license, which the exchange says will take seven days on its website.
Non-commercial risks
The Central Bank of Iran is also in charge of providing the investors with the necessary foreign exchangeForeign exchange reserves
Foreign-exchange reserves in a strict sense are 'only' the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, Special Drawing Rights and International Monetary Fund reserve positions...
, which is also transferrable. Moreover, under the law, foreign investors are protected and insured against possible losses and damages caused by future political turmoil or regional conflicts.
Dual listing
Iran is to target foreign investment in its energy sectorEnergy in Iran
Energy resources in Iran consist of the third largest oil reserves and the second largest natural gas reserves in the world. Iran is in a constant battle to use its energy resources more effectively in the face of subsidization and the need for technological advances in energy exploration and...
by creating an umbrella group of nearly 50 state-run firms and listing its shares on four international stock exchanges.
Offshore funds
The "Turquoise Iran Equity Investments" from the LondonLondon
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
-based investment boutique Turquoise Partners is one of the few opportunities for foreign investors to participate on the Tehran Stock Exchange. Turquoise Partners publishes one of the few English newsletters that covers developments of the Tehran Stock Exchange and the Iranian economy called "Iran Investment Monthly". As of July 2010, Turquoise Partners says it controls around 90% of the total value of foreign investments on the Tehran Stock Exchange. Turquoise is a private company with offices in Tehran
Tehran
Tehran , sometimes spelled Teheran, is the capital of Iran and Tehran Province. With an estimated population of 8,429,807; it is also Iran's largest urban area and city, one of the largest cities in Western Asia, and is the world's 19th largest city.In the 20th century, Tehran was subject to...
and London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
.
U.S. sanctions
U.S. persons need a license from the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) in order to invest in the TSE.See also
- Next elevenNext ElevenThe Next Eleven are eleven countries—Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, and Vietnam — identified by Goldman Sachs investment bank and Jim O'Neill as having a high potential of becoming, along with the BRICS, the world's largest...
- International Rankings of Iran in Economy
- Economy of IranEconomy of IranThe economy of Iran is the eighteenth largest in the world by purchasing power parity and according to Iranian officials' claims is going to become the 12th largest by 2015. The economy of Iran is a mixed and transition economy with a large public sector and some 50% of the economy centrally planned...
- Petroleum industry in IranPetroleum industry in IranIn 2004 Iran produced 5.1 percent of the world’s total crude oil , which generated revenues of US$25 billion to US$30 billion and was the country’s primary source of foreign currency. At 2006 levels of production, oil proceeds represented about 18.7 percent of gross domestic product . However, the...
- Construction in IranConstruction in IranIn recent years, the construction industry of Iran has been thriving due to an increase in national and international investment to the extent that it is now the largest in the Middle East region...
- List of Iranian companies
- List of banks in Iran
- Iranian Oil BourseIranian oil bourseThe Iranian Oil Bourse International Oil Bourse, Iran Petroleum Exchange Kish Exchange or Oil Bourse in Kish is a commodity exchange which opened on February 17, 2008. It was created by cooperation between Iranian ministries, the Iran Mercantile Exchange and other state and private institutions...
- Iranian labor law
- List of Mideast stock exchanges
External links
Tehran Stock Exchange (TSE)- Iran Securities and Exchange Organization (SEO) – Offers Quarterly Bulletin of Iran Islamic Capital Market
- Federation of Euro-Asian Stock Exchanges – TSE statistics/regulations/operations/international comparisons/calendar and latest news
- Iran's Capital Markets – Comprehensive 2003-Study Turquoise Partners – Monthly report on the Tehran Stock Exchange and Iran's economyEconomy of IranThe economy of Iran is the eighteenth largest in the world by purchasing power parity and according to Iranian officials' claims is going to become the 12th largest by 2015. The economy of Iran is a mixed and transition economy with a large public sector and some 50% of the economy centrally planned...
- List of top 100 Iranian companies – 2008 List by Iran Industrial Management Company
- Iran Daily: "Iranian Bourse Prospects for Foreign Investment"
- Iran CSD Company – ClearingClearing (finance)In banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. Clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction....
and setllement of trading, central registry - Association of National Numbering Agency (ANNA)
- World Federation of Exchanges (WFE)
Videos Iran's Stock Market – Part I Part II – PressTV
- 2010 Hike in Iran's Bourse – PressTV (2010)
- Investing in Iran – Part I Part II Part III Part IV Part V VI – CNBCCNBCCNBC is a satellite and cable television business news channel in the U.S., owned and operated by NBCUniversal. The network and its international spinoffs cover business headlines and provide live coverage of financial markets. The combined reach of CNBC and its siblings is 390 million viewers...
(December 2010) - Iran's flourishing economy - PressTV (2011)
- Iran's Bourse: Hallmark of Iranian economy - PressTV (2011)