With a market cap of about $90 billion, Iran’s stock market is fifth-largest in the Middle East. The lifting of sanctions allows the country to compete for investor attention with Saudi Arabia, which opened the region’s biggest stock market to direct foreign ownership seven months ago.
While investing on Tehran’s bourse was already legal for many international investors, financial sanctions placed on the banking system made it almost impossible to transfer money in and out of the country. The majority of those sanctions have been removed after an international deal over Iran’s nuclear ambitions, allowing the nation’s banks to reconnect to the Swift system for international financial transactions.
Although buying shares hasn’t been prohibited for Europeans, investing in certain industries, such as energy, has been off limits.
How can international investors enter?
There are two ways to access Iranian equities: invest directly, or go through local funds, said Parham Gohari, co-founder of Frontier Partners, a professional-services firm advising multinationals on entering Iran.
Investing directly requires the use of a broker based in Tehran, as well as a foreign trading license and investment code from the Securities and Exchange Organization. The code is needed to buy and sell securities in Iran.
The second way is to use a local fund. Several companies have been preparing foreign investment funds for Iran in anticipation of the lifting on sanctions. An index-linked ETF for foreigners already exists and a small fund exposed to sanctions-proof companies started in December.
“There are two or three bodies involved if you want to get through the direct route," Gohari said from Dubai. When using a local fund, “you would have to do your homework and understand the performance of some of these companies over the last few years," he said.
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