How to invest in Iranian stocks
Healy Consultants Group PLC
08 May, 2015
For residents of countries which do not restrict trade with Iran, there is a great opportunity to participate in the growing Iranian public markets as a portfolio investor. There are three public markets open to foreigners, namely:
- The Tehran Stock Exchange (TSE) Iran's equity market and main exchange
- Farabourse a convenient over-the-counter (OTC) market for smaller companies in search of greater liquidity;
- Iran Mercantile Exchange this is the third exchange option for commodities and commodity derivatives.
Current foreign laws in general restrict investment in Iran, but conveniently local Iranian Laws simplifies the process with the following steps:
- To make trades on these markets, you need to use a licensed Iranian broker, as private individuals are not allowed direct market access. Here's the full list of licensed Iranian brokerages for you to choose from;
- All foreign nationals and non-resident Iranians must obtain a license to invest in Iranian markets using foreign capital. The licensing forms are listed here, and these need to be submitted to the Iranian Investment Authorities through the local broker. All foreigners must complete Form 1, then individual investors complete Form 2, while legal entities (companies, partnerships, etc.) complete Form 3
10 days is the maximum approval time required for the license application, but it takes week on average. Once the trading license is secured, in accordance with Article 10 of the Regulations Governing Foreign Investment the investor can proceed to open and maintain a current or brokerage account in local currency with their preferred local provider.
Foreign currency is directly converted into Iranian Rials to support the local trade, investment and banking facilities. The same article in the Iranian investment law approves the repatriation of capital gains and dividends earned through this foreign portfolio investment without the need for Central Bank approval.
The question is, how to send funds to the local accounts?
Practically, the process to fund the brokerage accounts in Iran can be troublesome, due to the US sanctions on Iran. SWIFT does not cover the Iranian financial institutions, which usually work with regional partners. For example, a common practice is to work with UAE-based money changers to transfer funds in and out of Iran, which unfortunately suffer high transaction costs of up to 5% for each transaction.
Lastly, foreign direct investment (FDI) into Iran is done through the Foreign Investment Promotion and Protection Act (FIPPA) the same act governing the full foreign ownership of Iranian firms.
A great alternative to Iran's stock market
Since its inception two decades ago, the Muscat Securities Market has grown fourfold, with the MSM-30 as its main index. Due to the lack of foreign restriction on investing in the market, this option represents a great alternative to the nearby Iranian stock exchange. Here is a list of authorised brokers in Oman.
Learn more about Oman advantages and investment solutions in this business setup page.
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