The interminable negotiations between the six major powers and Iran may well be successful. If that is the case, sanctions will be gradually lifted. An opportunity in such a situation could be trading Iran stocks. The Wall Street Journal suggests that Iran stocks could be a target of foreign investors if sanctions are lifted.
If Iran reaches a nuclear deal and sanctions are lifted, Western investors are likely to queue up to invest in the country. The first stop for much of that money, at least initially, could be the Tehran Stock Exchange.
“Iran has a unique combination of frontier and developed characteristics that make it potentially compelling,” said Alison Graham, chief investment officer of New York-based frontier-markets investor Voltan Capital Management LLC. “It has a well-educated population, a large middle class, a substantial industrial base and has made progress in dismantling subsidies to get its macro house in order. At the same time, growth, valuations and potential investment upside are similar to frontier countries at a much earlier stage of development.”
Iran could use an infusion of foreign capital and has an attractive mix of investment opportunities. But, anyone interested in trading Iran stocks needs to do their homework first.
What Does Iran Have to Offer?
Iran has a trillion dollar a year gross domestic product ranking it 19 in the world. Oil is by far its greatest resource. The country has a well-educated middle class and a significant brain drain due to lack of opportunities. There is significant room of business expansion in many sectors. And Iran has a stock market in Tehran. Months ago Reuters published an article about the Iran stock exchange and how successful negotiations over nuclear issues could open this stock market to foreign investors and traders.
Years of economic sanctions and isolation have ravaged Iran’s economy but created one of the last unexploited opportunities for international portfolio investors, who could start moving their money in this year if geopolitics permit.
The Tehran Stock Exchange is “the last, large untapped emerging market in the world”, said Ramin Rabii, managing director of Turquoise Partners, a Tehran-based investment firm with around $200 million of assets under management.
The point of trading Iran stocks versus foreign direct investment in Iran is that the stock exchange will be the quickest way to benefit from economic improvements associated with the lifting of sanctions and increased foreign investment in Iran.
Follow the Iranians
As negotiations appear to be heading toward success Iranians are buying stocks on the Tehran exchange. Stocks went up more than a hundred percent over the last year and trading Iran stocks picked up in expectation of normalized relations with the West. Bloomberg Business writes about how Iranians pile into stocks.
While daily trading equals only about 22 seconds worth of stock transactions in the U.S., Iran’s market has been booming. The benchmark index soared 133 percent this year through Dec. 24 to a record, beating returns posted by the 93 major global equity gauges tracked by Bloomberg. Most of the rally followed the June election of 65-year-old Rouhani, who delivered an initial accord with global powers just five months into office.
Whether the Iranian economy goes up or down after normalization of relations with the West, trading Iran stocks could be profitable simply based on volatility. As always do your own homework and never be afraid to stay out of a trade that you do not understand.
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