Fund managers eager to invest in the Tehran Stock Exchange were cheered when sanctions against Iran were lifted this weekend, however the resulting fall in the oil price caused pain for those with exposure to energy stocks.
“At this historic moment when the Iranian economy has become accessible to global investors, Turquoise is ready to advise and guide intelligent investment into the country,” said Rouzbeh Pirouz of his Tehran-based firm, Turquoise Partners, which estimates it manages about 90% of existing foreign portfolio investment on the Tehran exchange. The company has launched a fund in partnership with London-based Charlemagne Capital that hopes to attract investment into the country.
Proponents of Iranian investment say the country’s stock exchange, which has a capitalisation of about $100 billion, is cheap, on price-to-earnings basis, compared to other emerging markets. Last year, Charles Robertson, chief economist at Renaissance Capital, speculated that the lifting of sanctions on Iran could initiate a process similar to the entry of Russia into global equity markets in the early 1990s. Charlemagne Capital claims Iranian GDP is likely to grow at up to 8% a year after sanctions are lifted.
The opportunity is estimated in proportion to Iran’s isolation. In recent years, it has been impossible for foreigners to buy or sell equities in Iran due to a ban on Iranian banks interacting with western financial institutions. In 2012, Iranian banks were disconnected from the Swift settlement system.
However, the enthusiasm about Iran’s return to markets was tempered by a sharp fall in the oil price, with the cost of a barrel of Brent crude sinking to $28. Markets seemed to be anticipating that the reappearance of Iranian oil in global markets would lead to a worsening of the oversupply that has caused oil prices to fall from more than $100 a barrel in 2014.
Norbert Ruecker, head commodities research at Julius Baer, said the oil market is “facing its final washout while transitioning to a new normal”.
“While the pressure today is highest on US shale, the longer-term challenges are most daunting for petro-nations and the Middle East specifically. Saudi Arabia is running dry on petrodollars and according to the IMF [International Monetary Fund], the country may be broke in five years if its expenditure patters remain unchanged.”
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