The Tehran Stock Exchange was steady on the last trading week of summer. The TSE All-Share Index was almost unchanged, closing at 76,450, 0.01% lower than the previous week. The TSE’s main index was neutral, leaving its three-month performance almost unchanged and recording 3.8% growth over the summer. While stock prices saw only narrow movements, the Ceramic & Tiles (+3.8%) and Sugar (+6.3%) sectors recorded the highest weekly increases. The overall index of sugar companies has been seeing regular increases for the last four weeks, culminating in 23.2% growth. Some experts believe the index has jumped because it is seen as an alternative investment amid the weak performances of other major sectors. However, some experts believe in the intrinsic potential of the sector. They believe sugar companies will outperform current forecasts. They also believe demand for sugar is currently outstripping supply at a time when import tariffs are expensive and prices are dependent on the official US Dollar rate. They forecast the price of sugar will go higher in the mid-term based on increases in the US Dollar official rate. In the Ceramics & Tiles sector, Aradakan Industrial Ceramics Co. (ARDK +12.76%) has announced plans for a 1,099% capital increase which would be financed through asset revaluation and retained earnings. This week’s top performing stock in the sector was Sina Tile Co. (SINA +13.67%). Initial reports from the industry show that companies are producing at around 50% capacity due to weak demand and will miss targeted sales volumes. The recent moves in these stocks however do not reflect these issues. The weakest sector of the week was Construction (-2.2%), which lost half of last week’s gain. Despite the improvement in the housing market and government efforts to enhance the purchasing power of property buyers, the stock market has not yet priced in these factors, indicating a lack of trust. Housing Investment Co. (MSKN -5.08%) was the weakest stock and pulled backed the sector’s index the most.
Reviewing the market from a technical perspective shows the market support remains at 76,500. The All-Share Index slipped to 76,099, and then partially recovered to close at 76,450. It was the highest level that the All-Share Index reached this week, and was 0.7% lower than its 50 day EMA. However, indicators are not yet showing promising signals. In order to consider the index back in recovery it must become stable above 76,500 in order to be able to move towards 77,500. The potential for the market to drop further down to the next market support at 74,000 cannot be discounted.
The TSE30 index, the index of the thirty largest companies by market capitalization, continued dropping, albeit slowly, closing at 3,089, a 0.7% decrease. In the last six weeks the TSE30 index has seen negative trends, losing 3.7%. Parisian Oil & Gas Development Co. (PASN -10.53%) was the weakest stock in the top 30s, following a 12.4% downward adjustment of its projected net income to USD 400 million for the financial year ending September 21. Metals & Mines Development Investment Co. (MADN +3.93%) recorded the highest weekly increase on the TSE30 index.
In the third trading week of September the TSE’s Average Daily Trade Volume (ADTV) surged by 123% to USD 67 million. The ADTV surge came on the back of various block trades and trade in participation bonds. This week the shares with the highest weekly trade volume were Azarab Industries Co. (AZAB +4.21%), SAIPA Group (SIPA +1.32%) and Machine Sazi Arak Co. (MARK -0.40%) with USD 6.9, USD 3.9 and USD 3.7 million worth of trades respectively.
On the Iran Fara Bourse (IFB) market, investors witnessed a 2% increase of the overall index, which closed at 815. The IFB’s ADTV continued to hike, recording 78% growth and reaching USD 57 million. This week equities were the most popular securities on the IFB with a total traded value of USD 139 million.
In the FX market, the official US Dollar rate rose by 0.2% to IRR 31,407. Similarly, the free market rate of USDIRR rose by 0.2% to stand at 35,655. The CBI reduced the official Euro rate and announced it to be IRR 35,164, 0.2% lower than the last week. EURIRR’s free market rate reached 39,920, a 0.1% decrease. British Pound Sterling experienced higher volatility, as its official rate was set at IRR 40,978 by the CBI, a 1.4% drop. Also, its free market rate declined by 1.3% to IRR 46,900.
The latest report from the Ministry of Industry, Mine and Trade on the automotive sector shows an increase in the volume of automobile production. The total production output in the sector increased by 10% to 486,261 vehicles in the first five months of the current Iranian Calendar Year, ended 21 August 2016. Passenger cars have seen the highest growth compared to other vehicle types, reaching 448,522 vehicles, a 10.6% annual increase. Iran Khodro is still the dominant player in Iran’s auto industry, producing 245,129 automobiles in this period, 4.7% higher than in the previous year. However, the fastest growth was seen by SAIPA Group which reported a 27.8% annual production increase to 198,523 cars. A review of different makes of car indicates that the Renault Logan, known as Todnar 90 in Iran, has seen the greatest increase in production and now makes up almost 7% of the passenger cars market. Todnar 90 is produced by both Iran Khodro and SAIPA Group. Iran Khodro’s main products are Peugeot cars which constitute the biggest single slice of market share. Production volumes of Peugeot cars have dropped by 4% this year yet Peugeot still constitutes 34% of all vehicles produced. Currently, there are three types of Peugeot cars in production – the Peugeot 405, the Peugeot 206 and the Peugeot Pars. The production volume of Peugeot Pars decreased by 22% to 48,325 vehicles, while the production volume of Peugeot 206 increased the most, reaching 54,274 and constituting 13% annual growth. As a result of the Joint Comprehensive Plan of Action (JCPOA) and the removal of sanctions related to the Iranian nuclear program, Peugeot and Renault have re-entered the Iranian market. Peugeot is set to introduce three new car models in a joint venture with Iran Khodro by the end of the current Iranian Calendar year on 21 March 2017. Renault has already imported a range of cars to the Iranian market. The Renault Sandero Stepway was recently introduced by Pars Khodro, a subsidiary of SAIPA Group, and is going to be produced in Iran. Furthermore, Citroen has just entered the Iranian market and has signed a contract with SAIPA Group to start a joint venture. It has been reported that Citroen and SAIPA plan to co-invest EUR 300 million to produce Citroen cars, targeting a production volume of 150,000 per annum over the next five years. In the stock market, the automotive sector has had a mixed performance.
To date, six months from the beginning of the current Iranian Calendar Year (beginning 21 March 2016), the Automotive sector’s index has dropped by 31%. However, the sector had been the Tehran Stock Exchange’s main driver in the period between January and April 2016, as its index recorded a 176% surge. Two weeks before the implementation of the JCPOA on January 16 2016, car companies saw their share prices jump, led by Iran Khodro and SAIPA Group. However, after three months of high growth, the stocks lost momentum. Today, the highest trade value on the TSE still belongs to the Automotive sector, although the sector has given up some of its incredible early gains.
written by Ali Karbalaee and Radman Rabii
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