- The impact of economic interactions in the USA and the Dollar’s rally against Euro on Iran’ markets will be most on the commodity prices. 70 percent of companies’ performances in Iran depend on the price of commodities. Euro depreciation will impact on the companies with imports from Euro region. Electronics and pharmaceutical sectors are the main importers from Euro. The companies with Euro assets will also feel the negative impact in their balance sheets. Currently the market does not pay attention to this matter. However, by continuing the depreciation of Euro, the attentions are expected to turn to this issue.
- Iran Customs released statistics report in which demonstrated UAE and China as the main importers during the past 11 months of the year ending 20 Mar 2015. Regarding the export, the most traded goods belong to Gas Condensate and petrochemical products such as Propane, Butane, and Methanol with share of 29.53 and 28.39 respectively. Based on this report, during the past 11 months the value of exports has increased by 22.05 percent, while the value of imports recorded only 12.3 percent growth during this period.
- Although due to current market recession the profit margin for the major national sectors is predicted 20 percent, this number is considered doubled in Petrochemical financial reports. The gross profit margin is forecasted 40 to 45 percent for petrochemical companies which have allocated 30 percent of market transactions. For instance, despite the reduction in global Methanol prices and decline in export earning, the Zagros Petrochemical Co. predicated 45 % for its profit margin. However, the feed rate is still a mystery in petrochemical next year budgets.
The market rallied today on a flurry of good news. Based on unofficial statements of one the SEO’s directors (Security and Exchange Organization of Iran), an ETF will be established soon which its unit holders have an option to sell 30 percent higher than initial price within one year maturity. If the NAV improves more than 30%, the units can be sold at market price. That means the fund will guarantee at least 30 percent interest for a year which is higher than deposit interest rates of all the banks. It is also mentioned that all the legal market entities can offer and underwrite these kinds of funds and the first one will be offered by the Market Development Fund. However, no more details have been officially approved by the SEO until now.
By Saeedeh Fakhim, Mahdi Goodarzi & Omid Q. Rose:
Mutual Fund is a type of financial institution which invests funds received from investors in a set of negotiable papers. Mutual funds have been established since 2008 in Iran. The SEO (Securities & Exchange Organization) issues licenses for establishment of mutual funds. Three main elements of each mutual fund in Iran include manager of fund, trustee and guarantor. Considering high validity of these companies and also careful supervision of the stock exchange on them, money default risk of the investors in mutual funds has reached approximately zero. Reception by the shareholders and considerable growth of mutual funds of Iran on the one hand and enactment of Law for Development of New Financial Instruments and Institutions in February 2010 on the other hand increased hope for increasing development of these funds. In this paper, we introduce and review return of Agah fund in Iran capital market.
Agah Mutual Fund
Based on paragraph 20 of article 1 of stock exchange law enacted in December 2005, Agah Mutual Fund started its activity by receiving license from stock exchange under registration No. 10616 as mutual fund on 13 July 2008. Performance of this fund is based on provisions of the articles of association and prospectus and based on the related laws and regulations.
- Based on the Iranian Tile & Ceramic Assembly’ report, Iran is the fourth producer and the fifth exporter of tile and ceramic in the world. With almost 700 million square meters capacity, Iran produces 450 Million square meters different kinds of tile and ceramics annually. Lack of essential infrastructure for export transportations and not paying attention to design and beauty of products, are indicated as the main problems of this sector.
- Although most of the listed petrochemical companies released their next year budgets with considering 8 cent ( 228 IRR) for the rate of their feeds, the parliament and the governments still have not approved this number. This factor has escalated capital market waiting condition. However, most of the active market players believe that the approved rate will be less than 10 cent and even if the rate of feeds is accepted at 9 cent there will be not be many differences.
After enactment of two very important laws in Iran including Stock Exchange Act, 2005 and the Law for Development of New Financial Instruments and Institutions, 2009, Iranian legislator has taken an important step in development of Iran’s capital market and coordination of this market with pioneer financial markets.
Therefore, Iran’s capital market entered a new phase in which the legal context was provided for activity of new financial instruments after enactment of the two mentioned laws. One of the instruments which had been commissioned even before enactment of the Law for Development of New Financial Instruments and Institutions in Iran’s capital market was mutual funds so that the first mutual fund started working in July 2007 and stock funds started working in early 2008 besides fixed income funds. The first exchange traded fund (ETF) was commissioned in September 2013.
- Iran with 72 cement companies is one the major cement exporters in the world. With 110 percent growth during the last 10 years, the production in this sector has reached 70 million tons annually. In 2002, regarding an approved comprehensive plan, most of the cement companies started to launch new production lines and increased their production capacities by 2-3 times which led to high cost of depreciation and interest expenses for foreign loans in past few years. Moving toward free rates for cement prices was the goal of this comprehensive plan. However, the contrary previous government actions led the prices fall to less than one fifth. Currently this sector is dealing with 15 Million tons excess surplus due to rigid controlling in prices besides the current recessions in the construction sector. For supporting the cement sector, the Housing and Urban development Ministry has suggested using concrete cover instead of Asphalt in road projects. Currently the cement consumption is 720 kg per capita in Iran which is planned to reach 770 in case of positive growth rate.
- Rouz Darou Pharmaceutial Co. released its 3Q1393 (year ending 20 Mar 2015) report. Rouzdarou’s main productions include variety of tablets and S.C. Tabs, Capsules and powders. The company sales all its products domestically while some parts of its ingredients are imported. last year the company imported 33% of its ingredients which have increased to 39% in 9 months period this year. The company predicted to increase its production by 10 % this year compared with last year and it could cover more than 74% of this forecasted amount. Generally, the company’s production in 3Q1393 has improved 9 percent compared with same period last year. The company also forecasted 22 and 26 percent increase respectively in its volume and value of sales for Y1393 compared with last year. Although the company’s return in Y1392 jumped by 293 percent compared with Y1391, it couldn’t maintain the same trend for this year. The EPS has been decreased by 30 percent to 263 IRR in 3Q1393 compared with same period last year. In current year budget, the company’s EPS is forecasted 29 percent less than last year EPS. In next year budget the company has reduced its EPS by 48 percent to 182 IRR. The reasons for this negative adjustment have not announced yet.
- Almost 178 companies announced their next year forecasted EPS among which 106 had positive adjustments compared with current year (ending 20 Mar 2015). In the Petrochemical sector 14 companies had positive adjustments and only 4 companies forecasted less than current year’s return. In pharmaceutical sector 19 companies predicted more return and only one declined its return compared with current year. In construction sector, 8 companies had positive adjustments for their next year’s return and two companies reduced their forecasted profit. In banking sector 3 companies expected more return for next year and one company adjusted its return negatively. In automotive sector, 7 companies announced more EPS and 6 Companies announced less EPS than current year. With regard to the SEO’s report (the Security and Exchange Organization of Iran) total forecasted returns have been improved by 8 percent compared with last year report. In year 1393 (ending Mar 2015), the companies forecasted return was 568,000 IRR bn in total which had been 523,000 in previous year. Moreover, the price to earning ratio has reached 5 in current year which was 7.9 in 1392.