British Money Managers Anticipate Major Iran Stock Market

Although the U.S. Administration's eagerly sought-after finalization of a nuclear pact with Iran by July 1 is no sure bet, London-based money managers, Charlemagne Capital and First Frontier Capital, are preparing a major entry into the Tehran stock market, in anticipation that such a definitive agreement will finally be constituted.

Even though these London market matchmakers realize that a final U.S./UN nuclear restraint agreement with Iran could still be derailed, they'd rather "jump the gun," than get lost in the rally that could allow Tehran's $110 billion equity market to take off. The expected relief from sanctions following such a pact is expected to triple Iran's economic growth rate, by eliminating Iran's restrictions on shipping oil exports to the U.S. and Western Europe, while ending the nation's restraint from the global financial and banking systems.

While Iran's global image has deteriorated geopolitically, with its ongoing support of para-military proxies in Iraq, Syria, Lebanon, Gaza and Yemen, its commercial development, built during the reign of the Westernized shahs, has allowed its 80 million population to achieve a leading business status in the overall Islamic Mideast, which has subsided since reaching an economic peak in the late 1970's. This was even then accomplished despite the iron grip of Iran's Revolutionary Guard, whose unflinching loyalties are committed to the supreme leader Ayatollah Khamenei. This is a fact that makes Rouhani, the official President, only a nominal figurehead. He depends on and is subject to the will of the supreme religious head, Ali Khamenei.

Global economic analysts project that Iran's unfettered economy could grow 6-8% annually, if and when the sanctions are totally voided. This compares with the low level gross domestic product growth of 2014, projected to have been one-third of what an unimpeded Iran economy could accomplish. As of now, U.S. and European sanctions restrict Iran's oil exports and isolate its financial institutions. The UN resolutions also bar trade in nuclear-related technology and military gear. A faster than expected rebound by Iran's financial institutions would be instigated by partnerships with local investment companies, which would facilitate their re-integration into Iran's commercial market as a whole. Charlemagne and First Frontier would be using partnerships with local investment companies to facilitate access to the increasing market potential.

This optimistic anticipation by the prospective Iranian partnership is reflected by the Tehran Exchange's main index, in which 315 companies trade. That trading floor had its best month in more than a year lately. Even with sanctions in place, the Tehran stock market gauge jumped 300% in dollar terms in the five years through 2013. This occurred despite a 17% slump in the 12 months through March 2015, that preceded the tentative "breakthrough," when the preliminary framework was adopted late in the month.

In following the normally politically-charged pattern of negotiations in the Mideast, with President Hassan Rouhani a veritable figurehead, all eyes will be on the Ayatollah Ali Khamenei, who will have the final word. Based on previous experience, the religious heads do not necessarily relate to a nation's economic interest, even one as commercially progressive as Iran has become.

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