A deal on Iran’s nuclear programme reached today in Vienna could begin an opening-up process similar to when Russia entered global equity markets in the 1990s.
The deal, announced this morning, confirms the framework agreement made in Lausanne in April in which Iran agreed to limit its nuclear programme in return for sanctions relief. For foreign investors, the crucial sanction to be lifted is the ban on Iranian financial institutions using the Swift settlement system.
With a population of 78 million and a market capitalisation of $95 billion, Iran is the largest and most important economy still closed to institutional investors, according to analysts at Renaissance Capital.
“The US Secretary of State expects sanctions to be eased within six-to-12 months of a deal,” Charles Robertson, Renaissance Capital chief economist, wrote yesterday. “We believe Iran’s reformers will try to minimise that timeframe, meaning Iran could be open to investors in early 2016.”
“As in Russia in 1996-1997,” he added, “we expect a strongly bullish stance from foreign investors.”
When the sanction on financial transactions is lifted, inflows into the Tehran Stock Exchange could be almost instant. Dominic Bokor-Ingram of Charlemagne Capital recently told Funds Global Mena that the re-entry of Iranian banks to global financial markets was “a question of flicking a switch”.
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