- 78m population, median age 27, 30% below 19, 60% below 30
- Hugely Strategic transit route – economics of the silk road still stand 2,000 years later
- Market Cap/PPP GDP at 8% (US 124%, UK 169%, Australia 129%, India 42%, South Africa 151%, Brazil 34%, KSA 61%, Qatar 92%, UAE 63%)
- Expected population in 15 years time of 100m
Easing of restrictions
- If the easing of restrictions happens the benefits will include:
- Currency stabilization or even appreciation.
- Lower inflationary pressures will induce interest rates lower.
- FDI multiplies, capacity & productivity will compound.
- Earnings power will re-rate proportional to intrinsic value and valuation multiples will expand.
Margin of safety
- Misunderstood + severely under researched=valuation anomalies.
- Inefficient market= growth opportunities sold at deep value discounts.
- Secular domestic driven growth trends.
- Asymmetric Risk Reward profile.
Encouragement of FDI
Government understands the need for foreign capital. The need for investments, technology, management training and employment. Free trade zones & special economic zones (FEZ & SEZ)
Government to reduce State’s role in the economy from 75% to 25%, across most sectors and industries. Expect $100bn of primary and secondary offerings over the next 5 to 10 years
No Dividend Tax or Capital Gains Tax in Capital Markets participation
Challenges to foreign investors
- Awareness and knowledge of sanctions & prohibited terrain
- US Treasury & discretionary, European, UN sanctions
- Limited access to reliable data & analysis
- Low understanding of regulatory environment and policy ambiguity
- Limited access to political and industry network
Higher barriers to entry create the opportunity.
As with any emerging and large economy, Iran has many idiosyncrasies that need to be understood and negotiated by potential investors.
Sentiment and understanding is poor, the first (contrarian) movers will have prospect of significant upside with margin of safety of limited downside.