The Budget to Boost Iran Economy
Submitted to the Majlis by President Rouhani on Sunday, the Budget Bill for the Next Persian Year (starting 20 March 2017) includes considerable points focused on deepening the debt market in the country, bringing prosperity to Iran Economy. Being enthusiastic to use the capital market capacities for financing its activities since its formation, the acting administration has become seriously focused on issuing Sukuks and Islamic securities since the prior year. According to this Bill, the government is to expand this market, issuing new securities worth $8,350.46 mn, of which $1,284.69 mn worth Sukuks and Islamic Treasury Bills will be released to cover the principal and yield on the ovedue securities with up to a 5 year maturity period. This will allow the government to transfer its debts to next years, deepening the debt market.
Of the total set amount, up to $5,138.75 mn securities, both in Rial and foreign currency, will be allocated to own to-be-completed capital assets. The government will be allowed to issue ITB worth $1,927.03 mn with 1-3 maturity periods. Besides, the government will be permitted to settle its debt to individuals and private sector and corporate entities, which have been caused until March 2017, using its certain claims from these persons worth up to $1,284.69 mn. Considering this budget figures, it is realized that the government is counting on the debt market capacity more than ever.
As can be seen, subsidiaries of the Ministries such as Energy, Oil and Gas, Road and Urbanization, and IT and Communication will be permitted to issue Mushareka Sukuks in Rial up to $2,569.37 mn to implement plans with sufficient technical, economic and financial feasibility, especially in housing and urban development, power plants and electricity distribution grids, transportation and water and sewage treatment plans.
In addition, the municipalities and their subsidiaries will also have the right to release Sukuks worth up to $1,284.69 mn whose payment of principal and yield are guaranteed by themselves. The Ministry of Oil and Gas will also be allowed to issue Moushareka Sukuks, both in Rial and foreign exchange, up to $1,284.69 mn to invest in oil and gas plans, with priority being given to Joint-Field plans; this, however, must be approved by the National Economy Council and the payment of the principal and yield of such Sukuks will be guaranteed by the Ministry of Oil and Gas relying on the increase in production in those joint fields.
The National Iranian Oil Company will also be granted the permission to use the released Sukuks, both in Rial and foreign currency, up to $ 3bn, having received the Council of Ministers’ approval and in line with the law for Mushareka Sukuks Release or the law of IRI Securities Market, in order to pay back the principal and yield of the overdue securities, the overdue banking facilities as well as the overdue debts to buy-back contractors for upstream oil and gas projects. The company will be obliged to settle the principal and yield of the issued securities within 5 years at most based on its domestic resources.
Being all said, as an important step to push the debt market forward, such an act can bridge the gap between Iran’s debt market standards and those of the creditable and reliable international ones. However, it seems that the sales of this amount of securities will require interesting return rates due to the current credit crunch and the high cost of money because the government has not issued as much debt securities so far as it is going to in the next year.
In the Market
The increase in US dollar price into account mainly due to reasons like the decline in dollar supply by the Central Bank of Iran, approaching the election period, approaching the implementation of foreign exchange rate unification, the administration attempt to compensate its budget deficit as well as the increase of US dollar in global markets, will all and all benefit export-based sectors; this can direct market players towards such sectors, including the Chemicals. As the result of this and intensified by the oil price increase, Paxan released its financial report for the first half making $0.01 EPS, which led the share to end in the +4% zone; it has been heard that the company is to enter into a joint-venture with a foreign company. Zagros Petrochemical and Kharq Petrochemical also closed in the same area.
Tuka Transportation Company in the Transportation group faced a buy queue; the company has won the project of heavy and half-heavy machinery to be used for loading and offloading in Kish Kave Steel Company, worth $2.21 mn which will increase the company’s net profit from $2.46 mn to $2.52 nm.
While tickers in the Cement sector went through sales pressure, mainly due to entering a correction phase such that Shahrq Cement and its Right faced sell queues, all symbols in the Construction group went through positive trades.
Despite the fact that oil price have passed $55 per barrel in international markets, all names in the Oil Products industry ended below their flat lines. Shedding 1.19% in its final price, 27 mn shares of Tehran Oil Refining were block traded making it the highest value and volume traded share.
Finally, most tickers in the Metals space were positively traded mainly due to the rise in global prices. Arfa’ Metal and Steel as well as Zarin Ma’dan Asia and Kimia-ye Zanjab Gostaran Mineral faced buy queues.
TSE at a Glance
Summary of Trades
Major Sectors’ Daily Performance
Trading Halts and Reopenings
IFB at a Glance
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