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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005 TEHRAN STOCK EXCHANGE Dr. Hussein Abdoh Tabrizi Secretary General 2004 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$ 47.0 billion, an increase of 36.6% in comparison to the previous year. This year, the average total return of investment on TSE listed stocks exceeded 33%, which in comparison to an inflation rate of 15% shows a high real rate of investment return in Iran's economy. Also, the total turnover to the TSE, compared with the previous year figures, reached US$ 13.3 billion, an increase of 157%. 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. The main elements of the rise in capital market interest among citizens in recent years can be attributed to: • The higher rate of return in comparison to traditional investment in other assets, HISTORY AND DEVELOPMENT 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. 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 of closure ended in 1989 and since then, the TSE has continuously expanded. By the end of 2004, 411 companies owned by approximately 3 million investors were listed on the TSE. PAGE 120 This year, the average total return of investment on TSE listed stocks exceeded 33%, which in comparison to an inflation rate of 15% shows a high real rate of investment return in Iran's economy. • Transference of government assets through IPOs to TSE's investors (allocated shares for privatization in 2005 will increase to US$ 3 billion as compared to US$ 2 billion in 2004), and • Greater opportunities in other aspects of the capital market as compared to the saturated money market opportunities. In March 2005, a new foreign portfolio investment regulation to 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 10 provinces, with trading floors at other provinces planned for operation for 2005. The TSE plans to add more trading floors in Tehran as well. FUTURE OUTLOOK Foreign investor laws/regulations include a new Foreign Portfolio Investment regulation to be enacted by the end of March 2005. 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. There have been numerous efforts for the geographical expansion of the exchange. There are now regional trading floors in 10 provinces that are fully operational. The trading floors at other provinces will be operational in 2005. There are also plans for expansion to more trading floors in Tehran. The TSE also intends to develop a mutual trading platform with the Istanbul Stock Exchange, Muscat Securities Market and some other members of FEAS to further regionalize the Exchange. ISE and TSE members will cooperate. The TSE intends to play more active role among FEAS member countries; actively participate in the Working Committee and Task Forces. The TSE is also planning to develop a common trading platform with Iran's neighboring countries as well as FEAS members. The TSE Services Company (TSESC) has been approved for FEAS Affiliate Membership. TSESC has recently initiated application for membership to the International Organization of Securities Commissions (IOSCO). Future plans also include the offering of new financial instruments of the TSE; such as derivatives, exchange traded mutual funds, and Real Estate Investment Trusts (REITS). There is also a plan for cross-listing of TSE’s listed companies at the regional and European Exchanges. Finally, TSE is in the final stage of implementing its new software. This is one of the most sophisticated software which comprehensively support all facets of Exchange’s products and activities such as securities, futures, options and derivatives, and also clearing and settlement. Our Services company, “TSE Services Company (TSESC)” – a wholly-owned subsidiary of the TSE – which has been newly accepted as Affiliate Member in FEAS, has applied for membership to the International Organization of Securities Commissions (IOSCO). There are plans to offer new financial instruments including derivatives, exchange traded mutual funds and Real Estate Investment Trusts (REITs). There is also a plan for cross-listing of TSE’s listed companies at the regional and European Exchanges. Finally, TSE is in the final stage of implementing its new software. This is one of the most sophisticated software suites which comprehensively supports all facets of Exchange’s products and activities such as securities, futures, options and derivatives, and also clearing and settlement.
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005 TEHRAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July-04 935.4 46.8 1,048.6 52.4 Aug-04 938.9 42.7 988.7 44.9 Sep-04 650.2 32.5 732.0 36.6 Oct-04 920.9 41.9 1,075.8 48.9 Nov-04 1,172.3 55.8 1,414.3 67.3 Dec-04 1,595.8 79.8 1,313.2 65.7 TOTAL 6,213.5 49.9 6,572.5 52.6 Bonds July-04 n/a n/a n/a n/a Aug-04 n/a n/a n/a n/a Sep-04 n/a n/a n/a n/a Oct-04 n/a n/a n/a n/a Nov-04 n/a n/a n/a n/a Dec-04 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other July-04 n/a n/a n/a n/a Aug-04 n/a n/a n/a n/a Sep-04 n/a n/a n/a n/a Oct-04 n/a n/a n/a n/a Nov-04 n/a n/a n/a n/a Dec-04 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index July-04 43,296.5 13,635.1 Aug-04 42,898.7 13,031.1 Sep-04 45,157.0 13,662.8 Oct-04 43,837.7 13,169.5 Nov-04 47,569.7 13,807.5 Dec-04 46,995.1 13,543.3 CONTACT INFORMATION MONTHLY STOCK VOLUME VS INDEX (US$ Millions) Stocks Index 1,600 1,400 1,200 1,000 800 600 400 200 0 July Aug Sep Oct Nov Dec Contact Name Mr. Karim Karimi E-mail int.dept@tse.ir Website www.tse.ir 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 MONTHLY MARKET CAPITALIZATION (US$ Millions) 50,000 40,000 30,000 20,000 10,000 0 July Aug Sep Oct Nov Dec PAGE 121
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