(Repeats AUG. 26 story. No change to text.)
* Tehran bourse up 330% since start of the year
* Energy stocks leap on oil price bets
* But inflation, capital controls also behind gains
LONDON, Aug 27 (Reuters) - The coronavirus crisis, an oil
price shock and crippling U.S. sanctions on Iran's energy and
banking sectors have brought the country's economy to its knees.
Yet the Tehran Stock Exchange is home to one of the top
performing equity indexes in the world.
Iran's benchmark TSE index (TEDPIX) has soared 330% since
the start of the year in local currency terms thanks to a
breathtaking rally in oil firms, refineries and the
petrochemical industry - accounting for more than a third of the
top 30 companies.
The steep ascent, however, may have little to do with
confidence in the country's future. Instead, it mirrors events
in Venezuela and Zimbabwe, where indexes have surged more than
400% in local terms amid rising inflation and capital controls.
"Stock market gains in Iran should not be viewed as a signal
of economic stabilisation, but rather a reflection of
hyperinflation and trapped capital, more akin to Zimbabwe than
Russia or Saudi Arabia," said Hasnain Malik, head of equity
research at Tellimer.
"Local wealth is seeking a refuge to preserve some of their
capital," he added.
The lion's share of the gains comes from energy firms - the
main source of foreign exchange revenue for the country, putting
the sector in a stronger position compared to others.
The Isfahan Oil Refining Company has roared 500% higher
since the start of the year, while Tehran Oil Refining Company
is up 450% and Bandar Abbas Oil Refining Company up 250%.
The trajectory of Iran's oil stocks seems out of line with
international counterparts, with refiners in Asia and North
America permanently closing their processing plants due to
uncertain prospects for a recovery in fuel demand.
The share prices of U.S. refiners Marathon Petroleum Corp
and HollyFrontier have halved since the start of
This summer, Tehran planned to sell some of its shares in
refineries including Isfahan Refinery, Tehran Refinery and
Bandar Abbas Refinery. However, a delay due to disagreements
among ministries has caused the stocks to retreat from their
record highs in the last two weeks.
"The government does not want to sell its shares cheap,"
said Arash Safari, a trader at TSE.
By selling part of its shares, the government seeks to raise
funds to curb a ballooning budget deficit due to oil sanctions.
Many traders invested their money in the refineries and
petrochemicals firms, betting oil exports will rebound one day
and oil prices will increase. Some were punting on oil prices -
which fell some 30% this year and are currently hovering at $45
per barrel - to bounce back to $70 in the coming months.
"The refineries with more exposure to exports benefited the
most from the rise in the stock market and the depreciation of
the rial," said an oil and products trader on condition of
A complicated web of restrictions and sanctions has made
Iran's stock market almost exclusively a playing field for local
investors. Meanwhile, rising price pressures have spurred more
retail investors to plough cash into shares.
"Inflation, or to be more exact expected inflation, is the
main factor for the rise of the index of the Tehran Stock
Exchange," a TSE spokesperson told Reuters.
"Fortunately or unfortunately, Iran's economy has long faced
economic sanctions which intensified in recent years - this has
limited the impact of the global economy on the Iranian
economy," the TSE added.
Inflation stood at 27% in July, according to Iran's official
statistics. The International Monetary Fund predicts it could
exceed 34% over the year. Iran's rial currency has weakened 70%
against the dollar since Jan. 1.
"A lot of capital that is flowing into the stock exchange is
money that otherwise would have been leaving Iran, but now is
actually a more difficult time for Iranians to find ways to take
their capital abroad," said Esfandyar Batmanghelidj, founder of
Bourse & Bazaar, a think tank focused on Iran's economy.
Clerical rulers also encouraged ordinary Iranians to invest
in local stocks to boost the country's economy.
While analysts and traders warn of a bubble that could
burst, President Hassan Rouhani called the unprecedented rally a
sign of economic resilience against the U.S. sanctions.
"They are all angry and say that the stock market is in
turmoil all over the world," Rouhani said in April. "Why is the
Iranian stock market growing? Iran's stock market is good
because of the efforts of all companies and economic activists."
(Reporting by Bozorgmehr Sharafedin and Karin Strohecker;
Editing by Mark Potter)