The possibility of interest rate changes are increasing. Besides influencing the money demand and supply, any changes in interest rate can act like a double edged sword for banks. Decline in cost of interest will lead to lower cost of money for banks. Moreover, deposit cash withdrawal will be likely to happen if the interest rates are cut by more than 2 percent. If any changes in interest rate associate with the final nuclear agreement, a huge liquidity will flow from banks to other capital market sectors.
A series of initiatives by the leading Iranian financial group, the Agah Group, and the London-based boutique investment bank, First Frontier Capital (FFCL), is demonstrating the growing international enthusiasm for investing in Iran.
They are working together to set up a sanctions-compliant investment opportunity. This will enable international investors to become involved in the equity market even before the boost that is expected to come from a final deal to remove economic sanctions.
Based on cement association reports, the request for a price increase has been submitted to the government. The capacity of Iran’s cement production is around 82 Million a year. Last year (ending 20 Mar 2015) the production and sale of 67 Million tons was recorded. Currently the cost of production has increased by 20 percent. At the present time the EXW price of cement is 1000 IRR per ton which is requested by the cement association to increase by 17 percent.
“It’s expected that the exchange prices turn to a single exchange rate in the Petrochemical Industry soon “The CEO of the National Petrochemical Co. said. Existence of two official and free float exchange rates has made so many problems for this industry. He mentioned that some of the petrochemical complexes have no willingness for selling their products to other domestic companies with official exchange rate since they are able to export with higher free rates. However, during the meeting between Seyf, the chief of central bank of Iran, and PMs ; last night, some issues of the exchange market were discussed in order to support the domestic producers, and Seyf clarified that “at this moment with regard to the nation’s economic situation, having a single exchange rate is not possible”.
“Transparency in the market could have an essential role in improving the nation’s economic productivity”, Fetanat, the chief of the Security and Exchange Organization of Iran said today. He added that not even the shareholders will benefit from the market transparency, the government and taxing system will also profit. He clarified that publishing only government circulars and bills will not be enough for this purpose. He mentioned that improving the transparency of financial statements is one of the main SEO’s objectives and soon the opaque sectors will be required to publish monthly financial reports.
7 years ago, Hugo Chavez and Ahmadinejad, former presidents of Venezuela and Iran, agreed to build a petrochemical complex with the annual methanol production capacity of 1,650 thousand tons, within 3 years in Asalooyeh. Based on this agreement, “Veniran” a mutual company founded for running the Metanol Apadana petrochemical project. However, the foreign partner failed to meet its commitments on time and finally the International Petrochemical Co. (subsidiary of Persian Gulf Holding) is investing in this project. During the past year the project has made a remarkable progress. Regarding the latest reports, the installation of 450 and 250 tons cranes are finished and the first tower is being installed. The tower is made domestically with 170 tons weight and 50 meters height. The cost of this project is estimated 500 Million USD.
Based on a new contract between Iran Khodro Co. and Peugeot, 3 new products including Peugeot 301,208 and 2008 are determined to be produced in Iran. Moreover, a mutual company will be founded with the equal investment of both Iran khodro & Peugeot companies. The board member of this company will be a group of Iranian and French experts. Technology transfer and producing 40% of products domestically are the main contents of this contract. Exporting the 30 percent of mutual products is predicted for this company.
Mobin Petrochemical Co. is planning to offer 5 to 10 percent of its stake in TSE probably on next Wednesday. The company with the capital of 1.425 thousand billion IRR could make 397 IRR return per share in 9 months period of FY2014. This amount increased by 9 percent compared with same period last year. Mobin has forecasted 539 IRR EPS for FY2014 which could be covered 74 % in 9 months period. Although Mobin’s sales value increased by 104 percent in 9 months period compared with last year, the gross profit moved up only by 28 percent. However, the profit margin reached to 28 percent which was 46 in same period last year. Persian Gulf Petrochemical Industries Co. currently is the one hundred percent owner of Mobin. Based on Mobin’s 2Q2014 report, the company’s foreign currency debt to Persian Gulf Petrochemical Industries Co. is 149 Million USD.
Yesterday the value and volume of trades recorded incredible numbers. Saderat Bank could record the highest retail volume of trades since so far by over 1 billion and 130 million shares. The possibility of lifting swift sanctions besides the governmental support for strengthening banks such as approving their raising capital and selling the shares of banks’ subsidiaries would make significant changes in this sector. It could be said that the banking sector is the leader now. The automotive sector has also attracted a huge amount of new liquidity during the past few days. It seems the risk of sanctions and political tensions are getting eliminated from the market and the equities are flowing to the market. Today the new price levels attracted more sellers. The value and volume of today’s trades was considerably less than yesterday while it is still more than last year.
While the inflation rate has slipped to 15 %, many experts believe that the deposit interest rate cut must be done to get the liquidity out of the banking system. By Lausanne framework deal and the possibility of nuclear agreement the probability of cut in the banking interest rate has increased. However, the banking account situations will also matter for this decision. Currently most of the banks have high bad debts accounts that have declined their lending power.