TEHRAN STOCK EXCHANGE
Dr. Hussein Abdoh Tabrizi
Secretary General
There is a new foreign
portfolio investment
regulation to be enacted
by March 2004, which
will meet the standards
of FIPPA and facilitate a
gradual approach to the
repatriation of both
principle and dividends
of foreign investors.
2003 at the Tehran Stock Exchange (TSE) was
a year of enthusiasm on all dimensions. The
trading volume witnessed a remarkable growth:
market capitalization was US$ 34.4 billion, an
increase of 140% in comparison to the previous
year. This year, the average total return of
investment on TSE listed stocks exceeded
131%, which in comparison to an inflation rate
of 16.5% shows one of the highest real rates of
investment return in Iran’s economy. Also, the
total turnover of the TSE, compared with the
previous year’s figures, reached US$ 5.17
billion, an increase of 133%.
The Central Depository System is being
established. The TSE expects to perform a
series of development plans for market
administration, regionalization, the introduction
of new financial instruments, reinforcement of
stockbroker regulations (in collaboration with
the World Bank), and to continue the
establishment of regional floors in major cities
of which Mashhad, Tabriz and Isfahan are
currently operational. The main elements of the
rise in capital market interest among citizens in
recent years can be considered due to:
• the higher rate of return in comparison to
traditional investment in other assets,
• transference of government assets through
IPOs to TSE’s investors (allocated shares for
privatization in 2004 will increase to US$ 3
billion as compared to US$ 2 billion in 2003),
and
• greater opportunities in other aspects of the
capital market as compared to the saturated
money market opportunities.
In March 2004, a new foreign portfolio
investment regulation to meet the standards of
FIPPA and facilitate a gradual approach to the
repatriation of both principle and dividends of
foreign investors is to be enacted. Initially it will
be offered to institutional investors with limits on
the percentage of foreign ownership.
Parallel to electronic expansion is a program to
give Iranian investors further access to the
capital market. Currently, there are regional
trading floors in the cities of Mashhad, Tabriz
and Isfahan that are fully operational, with
trading floors at Shiraz and Ahvaz planned for
operation by March 2004. The TSE plans to
add three trading floors in Tehran, with monthly
openings in other major cities.
The TSE is also planning to develop a common
trading platform with Iran’s neighboring
countries as well as FEAS members.
A Memorandum of Understanding was signed
with the Bahrain Stock Exchange in September
2003. Another project recently initiated by the
TSE is the application for membership to the
International Organization of Securities
Commissions (IOSCO).
Future plans also include the offering of new
financial instruments on the TSE; such as
derivatives, exchange traded mutual funds, and
Real Estate Investment Trusts (REITs).
HISTORY AND DEVELOPMENT FUTURE OUTLOOK
Having a well organized stock market to speed
up the process of industrialization of the country
goes back to the 1930s when Bank Melli Iran
studied market possibilities. The outbreak of
World War Two and subsequent economic and
political events delayed the establishment of the
TSE until 1967. The TSE opened in April 1968. Foreign investor laws/regulations include a
new Foreign Portfolio Investment regulation to
be enacted by the end of the year which will
qualify for FIPPA protection. This is a gradual
approach with respect to the repatriation of
both principal and dividends by foreign
investors. It will be initially offered to
institutional investors, and there will be limits
on the percentage of ownership by foreigners.
Initially, only government bonds and certain
state-backed certificates were traded. During
the 1970s, increasing global oil prices boosted
the capital demand for stocks. In 1979, after the
Islamic revolution, operation of the TSE was
closed down. This period ended in 1989 and
since then, the TSE has continuously expanded.
By the end of 2003, 370 companies owned by
2.8 million investors were listed on the TSE.
There have been numerous efforts for the
geographical expansion of the exchange.
There are now regional trading floors in the
cities of Mashhad and Tabriz that are fully
operational. The trading floors at Isfahan,
Shiraz, and Ahvaz will be operational in 2004.
There are also plans for expansion to 3 other
trading floors in Tehran.
The TSE also intends to develop a mutual
trading platform with the Istanbul Stock
Exchange and some other members of FEAS
to further regionalize the Exchange.
Another project recently initiated by the TSE is
the application for membership to the
International Organization of Securities
Commissions (IOSCO).
There are plans to offer new financial
instruments at the TSE. Examples include
derivatives, exchange traded mutual funds
and Real Estate Investment Trusts (REIT).
FEDERATION OF EURO-ASIAN STOCK EXCHANGES YEARBOOK 2003/2004
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