An Iran freed of economic sanctions would prove the final frontier for global equity investors, according to investment bank Renaissance Capital.
In a 14-page report entitled “Iran: A New Hope,” Chief Economist Charles Robertson says that on a recent visit to Tehran he found a “remarkable consensus” that the country would reach a comprehensive accord on its nuclear program with the U.S. to allow an easing of sanctions.
“The past 10 years have seen global investors reach into previously untapped markets, from local currency corporate bonds in emerging markets to equities in frontier markets,” Robertson, who is based in London, wrote in the March 11 report. “We believe Iran would represent the last such opportunity globally.”
An initial deal in November between Iran and world powers over the Islamic republic’s nuclear program sparked speculation that foreign companies may soon be able to access a country with a population as large as Turkey’s. More than 100 French businesspeople traveled to Iran last month to explore potential deals in the energy, construction, aviation and automotive industries.
Iranian leaders, including President Hassan Rouhani and Foreign Minister Mohammad Javad Zarif have said the government is seeking a comprehensive agreement with Western powers. Rouhani, who became president after a surprise first-round election win in June, campaigned on pledges to ease sanctions and end Iran’s isolation.
Iran’s stock market surged more than 130 percent in 2013 and has a total market capitalization of $170 billion, Robertson wrote. He said “many on the ground appear to believe there is a good chance” for the country to open for investment within the next 18 months.
Difficulties include a banking industry that “looks as weak to us as Russia’s did in the 1990s,” he wrote. The International Monetary Fund estimates the economy shrank in both of the past two years. While oil output rose last month, it’s still near a 25-year low.
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