The Curious Case of Iran’s Stock Market


The recent removal of sanctions against Iran will prove to serve as a major economic catalyst for Iran, and investors should begin to start noting the opportunities of Iran’s stock market and economy.  Iran is by no means a small contributor to the global economy, and apart from the country’s ability to thrive amid low oil prices, it is also a key global contributor in the following areas:

  • World’s 4th largest cement producer
  • World’s 18th largest automaker, and one of the largest automakers in Asia
  • World’s 14th largest steel producer

The Institute of International Finance projected that the removal of sanctions would result in 6% GDP growth, and Iran previously delivered 1.4% growth amid the burden of sanctions.  On top of this, Iran’s stock market rallied strongly after the removal of sanctions in January.

Stock Market Overview

Iran’s stock market is on par with other frontier markets in many ways, and trades at a strong discount to other frontier markets:

  • Iran’s stock market has over 600 listed companies, with a total market capitalization of approximately $140 billion.  It is the 5th largest stock market in the Middle East, and easily on par with other frontier markets.
  • The average P/E for its stock market is 5.6, and it offers an average dividend yield of 12.6%.
  • The stock exchange consists of a large number of companies in diversified industries outside of oil production.
  • Index futures and options may be launched in a year, which will include the ability for investors to short stocks.
  • Trading is carried out on Saturday-Wednesday from 9 a.m to 12:30 p.m.
  • There are also a large number of mutual funds and an index linked ETF, for investors wishing to utilize a fund of fund approach.


Despite the removal of sanctions, a large number of barriers still exist for investors, primarily for US investors.

  • Only Non US investors can invest in Iran directly.
  • Banks are not connected to SWIFT, presenting difficulties for transferring money out of the country.
  • Foreigners can not buy shares of all companies.  Sanctions remain in place for around 200 businesses and individuals, some of which are connected to listed equity.

Industry Approach

I filtered through certain areas and found strong value investment opportunities in the oil, cement, banking, and pharmaceutical industries.

Industry Average P/E for Observed Companies
Pharmaceutical 6.4
Cement 5.3
Oil 4.2
Banks 4.3

Source: Tehran Stock Exchange

Oil Stocks: Iran’s ability to thrive in a low oil price environment certainly makes this industry worth noting, as the stocks I noted trade at an approximate 25% discount to the index.  Accounting for approximately 10% of the country’s GDP, this sector is a key driver of the economy, and Iran has already proven its ability to have a strong global impact on oil prices.

Automotive Stocks: The automotive industry is the country’s 2nd largest sector, and Iran has strong potential to serve as an automotive manufacturing hub in Asia.  However, the valuation for stocks that I observed was very high.

Cement Stocks: Iran has an approximate 1.83% global share in cement production, and exports cement to approximately 24 countries.  The stocks I observed trade at an approximate 5.4% discount to the index.

Banking Stocks: Valuation for banking stocks is low, trading at a 23.2% discount to the index, yet like many frontier markets, the issue of non performing loans needs to be reconciled.  NPLs were 13.4% as of June last year.

Pharmaceutical Stocks: Iran’s pharmaceutical industry has thrived amid previous sanctions, and this seems to be one of the most unique, high growth opportunities the country offers.  Valuation is reasonable, as 46% of the 27 companies I looked at are trading at a discount to the index.

Taking a Closer Look at Iran’s Pharmaceutical Industry

Iran’s pharmaceutical industry has ample room for domestic growth, and much to offer the world in terms of exports:

  • Iran is the largest manufacturer of generic drugs in the Middle East and Africa, and much of this region is reliant of imports.
  • Large companies such as Novartis, Sanofi, and Novo Nordisk were already active in Iran during sanctions.
  • Iran is developing its first private industrial pharmaceutical city with over $2 billion in investments, including a large number of research and development centers, a central lab, chemical and biotechnology medicine producers, and distribution facilities.  100 companies will be based in this center.

Iran produces 90% of its medicine, and the Ministry of Health is targeting full self sufficiency in the future.

Peace and Mutual Prosperity

I am pleased that these sanctions have been removed, and have hopes that the opening of Iran’s market will prove to be prosperous for the country and those who choose to invest in Iran in the future.  Iran offers bar none value to frontier market investors, and this new development should certainly be noted for the future as a strong catalyst for Iran’s economy, and a unique opportunity for funds investing in frontier Asia. For the time being, the most rational solution would be observing locally managed funds in Iran to invest in.




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