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EghtesadOnline: After weeks of tepid performance, a wave of good news regarding changes in the government's foreign exchange policy heaved stocks to heights never seen before.

Overall, TSE's all-share index TEDPIX, jumped by 15,151.2 points or 13.92% during the week that ended on August 1 to close at 123,951.3. 

Iran Fara Bourse’s benchmark index, IFX, surged by 196 points or 16% to stand at 1,428.5.

For both indices, this was their highest-ever weekly growth (and highest daily growth on Tuesday) and a new historical high, according to Financial Tribune.

> New Forex Policy on Horizon

Basically, not much happened last week other than forex developments. Yet that was more than enough to revive equities' rally and push stocks beyond what they had achieved before.

Reports on Saturday said the Money and Credit Council decided to limit the allocation of 42,000-rial USD to imports of essential goods and medicines, and guide all hard currency earnings from non-oil exports to the newly-founded Secondary Forex Market.

That's what investors were wishing for ever since the introduction of tight FX controls in April, and despite a wave of denials in the following days, traders flooded the market during the week.

In a statement published by the Central Bank of Iran on Monday, the bank said it would soon launch new measures "in the coming days". 

During his inauguration last week, the new CBI Governor Abdolnasser Hemmati said he had devised a plan to control the forex market and discussed it with President Hassan Rouhani.

Also, Deputy Majlis Speaker Masoud Pezeshkian said on Tuesday the FX package would be unveiled in the coming week. First Vice President Es'haq Jahangiri and Majlis Speaker Ali Larijani's similar remarks during the week further support this likelihood.

"In the new package, the Secondary Forex Market will be seen as the official price reference," said Masoud Kimiaei-Asadi, a member of Iran Chamber of Commerce, Industries, Mines and Agriculture. 

"Other FX earnings such as petrochemicals and steel will enter the Secondary Market and would be sold to importers at negotiated rates."

According to Bourse Press, the "negotiated rates" will range from 80,000 rials to 85,000 rials per USD.

> Winners, Loser of New FX Policy

Even though the new FX policy's details have yet to emerge, certain assumptions can be made about which industries are in line to benefit most.

Petrochemicals will simply be at the top, as they are heavily export-oriented and have little fixed costs. 

According to Donya-e-Bourse, if the USD/IRR rate is discovered at around 80,000 in the secondary market, their earnings would at least double compared to the last fiscal year (March 21, 2017-18).

Mineral and metal producers would come second, as they face similar fundamental factors to petrochemicals but have recently come under the government's spotlight and are subject to export controls, tariffs and enforced pricing at Iran Mercantile Exchange.

Among large sectors, refineries will reap limited benefits, as their main products are being priced at the official rate. Yet other products–sold at new FX rates–can also lift them up above 20% in profit.

Automakers, on the other hand, will be on the losing end. The new normal will see raw material prices growing while they're still blocked from boosting prices. The same fate in fact applies to pharmaceuticals and services industry.

Overall, export-oriented stocks are golden right now and their growth will give a boost to the index due to their weight.

> Currencies, Gold Coin Keep Marching

Rial kept its devaluing trend last week against the US dollar and euro, as the benchmark Bahar Azadi gold coin ceased to halt its price hike. 

The news of developments in FX policymaking did slightly retard their growth midweek, but failed to bring them below levels reached last week.

The gold coin surged 14% in value during the week to 36.51 million rials, according to Tehran Gold and Jewelry Union’s data. Its value has jumped since the beginning of the fiscal year (started March 21) by 132.5%.

The rial was quoted at 130,610 against euro by the week's close. It marked a 19.59% rise for the European currency for the week and brought its gains so far this year to 123%.

As for the unofficial USD/IRR rate, it grew about 14% to around 106,500 rials. 

> Weekly Trade in Detail

Over 9.4 billion shares valued at $602.2 million were traded on TSE last week. The number of shares traded and trade value grew by 49.2% and 55.5% respectively compared to the week before.

TSE’s First Market Index grew by 11.406.9 points or 14.44% to end at 90,363. The Second Market Index rose by 29,012 points or 13% to close at 251,412.

And at IFB, over 3.21 billion securities valued at $338 million were traded, with the number of traded shares and trade value growing by 207% and 24% compared to the previous week respectively.

IFB’s market capitalization also grew by $2.08 billion or 6% to reach $38.31 billion. This brings the cap's growth to 15% since the year began.

Its First Market witnessed the trading of 822 million securities valued at $40 million, growing 749% and 873% respectively.

About 1.55 billion securities valued at $109 million were traded in the Second Market, with the number of traded shares and trade value jumping by 188% and 232% respectively.

Over 7 million debt securities valued at $135.6 million were also traded at IFB, with the number of bonds traded and trade value dropping by 28% and 33% respectively.

The number of traded securities and trade value grew 81% and 37% respectively for exchange-traded funds to reach 57 million worth $18.5 million.

Trade was down for housing mortgage rights’ trade, as it reached 44,000 securities worth $6.6 million, dropping 4% and 6% respectively.

 

Iran Stocks foreign exchange policy