Bourse in sanctions-hit Iran seeks investors abroad

By Fredrik Dahl

DUBAI, June 20 (Reuters) - Iran may be facing growing international isolation but the head of the Islamic state's stock exchange argues planned privatisations and low valuations could create attractive opportunities for foreign investors.

Less than two weeks after the U.N. Security Council imposed a fourth round of punitive measures on Iran over its nuclear programme, senior executives of the Tehran Stock Exchange (TSE) travelled to Dubai in a bid to lure new capital to the market.

Analysts say Iran needs foreign funds and expertise to help it modernise and expand its oil industry and other sectors, but that Western firms and others are becoming increasingly reluctant to invest there due to the long-running nuclear row.

'We don't even look at the Iranian market. There is just too much political risk involved,' said Robert McKinnon of ASAS Capital, an asset management company in Dubai.

Saturday's road show, the first of its kind for the TSE, was planned before the latest sanctions and like other Iranian officials TSE President Hassan Ghalibaf Asl played down their impact, saying share prices firmed further after the U.N. vote.

In the 2009-10 Iranian year, which ended in March, the market jumped 57 percent and it rose another 12 percent in the first three months of this year, outperforming other regional markets, according to TSE officials.

The TSE's market capitalisation now stands at above $70 billion, with more than 330 listed companies, in sectors ranging from telecommunications and banks to steel and petrochemicals.

'Market reaction ... shows that the sanctions are not important in the point of view of investors,' Ghalibaf Asl said.

'We are trying to attract foreign investors. We are eager to connect our capital market to other markets,' he told Reuters.

The new U.N. sanctions target Iranian banks suspected of connections with nuclear or missile programmes. They also expand an arms embargo and call for a cargo inspection regime.

European Union measures agreed last week -- some of which are aimed at 'key sectors of the gas and oil industry' -- could have a greater impact on the OPEC member's economy.



PRIVATISATIONS?

Amir Mohammad Salamati, a board member of Nahayat Negar Brokerage in Tehran, said the Iranian market was 'very cheap' and he saw the banking and mining sectors as opportunities.

'If they (foreign investors) are adventurous and accept the risk, they can get a very good return,' Salamati said.

Saturday's event in a luxury hotel was targeting mainly Iranian businessmen in Dubai, a regional trade and finance hub across the Gulf from Iran. Tens of thousands of Iranians live and work in the Arab emirate.

It was the first in a drive to promote Iranian firms 'among the international financial community,' a TSE statement said. Analysts say few foreign investors are now active in the market.

Iran is taking action to remove red tape and restrictions on investors transferring money out of the country, according to state media. The limit on a foreign investor's stake in a firm's shares has been increased to 20 percent from 10 percent.

Asked why investors abroad should enter the market despite the nuclear dispute, Ghalibaf Asl listed a price/earnings ratio of less than six as well as the government's plan to privatise 150 state-owned firms in the next three years.

Investors pay no dividend or capital gains tax, he added.

'It is my recommendation to test the TSE,' Ghalibaf Asl said in his address to the investor forum.

In April, an official said Iran aimed to raise $12.5 billion this year by selling state firms, including two refineries. But analysts say some of them may simply end up being transferred within Iran's vast public sector.

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