Iran’s Suspended Sanctions Believers
The Tehran Stock Exchange extended its post-Rouhani election advance and the currency firmed from 30,000 to the dollar on a six-month nuclear development for sanctions freeze agreed in Geneva with Western, Russian and Chinese representatives. It will partially lift bank account, oil sales and gold trade blockages to release an estimated $7 billion, while curbs still in place forego quadruple that amount in revenue. Non-petroleum activity through Dubai down one-third should benefit, and officials may use the proceeds to tighten subsidy and monetary policies which produced budget deficits and 40 percent inflation in the outgoing administration as GDP contracts 5 percent and youth unemployment stands at 30 percent. Banks are reluctant to lend amid rising small-business defaults, while big industries from energy to construction remain controlled by the Revolutionary Guards with reported $100 billion annual income and regular privatization wins. The unit and its preferred network of private business executives strongly oppose rapprochement with the US 35 years after the hostage crisis, but their contracts abroad have been hit by the global boycott regime. The EU has stepped up pressure on hundreds of companies and individuals since 2010 and targeted strategic shipping lines. Oil giant Total was one of the last foreign joint ventures before the break and may consider an eventual return should the previous buyback arrangement requiring full advance payment change. Tourism from Europe and the Middle East has already spiked with the presidential transition as one million visitors entered in recent months unlike in next door Iraq, where security is precarious after the US military pullout. The Baghdad local index is ahead slightly after the landmark Asiacell IPO, and foreign banks like Citigroup and Standard Chartered intend to open branches soon as custody services are established. Listed banks have completed rights issues and family-run conglomerates may go public in the near future, according to fund managers.
The UAE due to join the core MSCI universe reinforced its 50 percent surge with the diplomatic breakthrough, as the two constituent bourses also revisit merger plans. Dubai government-linked firms owing $85 billion in medium-term debt by IMF calculation have unloaded trophy assets including the Atlantis resort as the emirate vies to host the 2020 World Expo. Moody’s upgraded the banking sector outlook to stable with the borrower sales and new central bank rules limiting state company exposure beyond high-quality instruments and first-time home loans. It also will launch a domestic debt market for fiscal and monetary operations and Islamic and conventional bonds listed overseas may be added to the local exchanges. Saudi Arabia was also solidly positive on the accord struck with a longtime religious and geopolitical adversary, after authorities expelled expatriate workers in an effort to recruit Saudis into middle-wage jobs. The exchange unveiled a cross-listing framework with Gulf neighbors and tougher broker capitalization standards as bank profits were steady on the meager blast from the new mortgage law.
