Podcast Summary
Investing in the Tehran Stock Exchange: Opportunities Amidst Geopolitical Risks and Sanctions: Maciej Wojtal of Amtalon Capital discusses investing opportunities in Iran's Tehran Stock Exchange, despite geopolitical risks and sanctions, and the growing retail participation and liquidity in the market.
While the global markets have been dominating headlines due to geopolitical tensions between the US and Iran, there is another stock exchange that has gone relatively unnoticed - the Tehran Stock Exchange in Iran. Despite the geopolitical risks and stringent sanctions, there is an asset manager, Amtalon Capital, that is focused on investing in Iranian stocks. Maciej Wojtal, the founder of Amtalon Capital, shared his insights on this unique market during a recent episode of the All Bots podcast. He explained that despite the challenges, there are opportunities in the Iranian market, and retail participation and liquidity are growing. However, investing in Iranian stocks comes with its own set of complexities, including navigating the sanctions and understanding the regulatory environment. Despite the risks, Principal Asset Management, with its 360-degree perspective, recognizes the potential of such markets and delivers local insights and global expertise to help identify compelling investing opportunities. For more information, visit principalam.com. Investing involves risk, including possible loss of principal.
A Polish investor found opportunities in Iran's untapped market: A Polish investor established a fund to capitalize on Iran's untapped potential, offering high growth and attractive valuations despite legal restrictions.
Despite being raised in Poland and working in London, a Polish investor was drawn to the investment opportunities in Iran due to its untapped potential as a developing country with a large population, diverse economy, and significant natural resources. The Iranian stock market, which opened up to foreign investors in 2016 after years of sanctions, offered attractive valuations and high growth potential. However, investing in Iran comes with significant legal restrictions, particularly for US investors and entities subject to US sanctions. Despite these challenges, the investor saw opportunity and set up a fund to capitalize on it. Surprisingly, the Iranian equity market was the best performing in 2019 in dollar terms, offering potential for both capital appreciation and dividends.
Best performing equity market with 99.5% increase in 2022: High net worth Europeans invest in Therab's stock market for high capital gains, despite geopolitical risks, due to high dividend yields and earnings growth of domestic companies, particularly in food production.
Therab's stock exchange, which is not well-known but had the best performing equity market last year with a 99.5% increase, offers high capital gains opportunities despite the perceived risks. The investors in this market are primarily high net worth individuals from Europe who understand the risks and are willing to take them due to the potential returns. These risks include geopolitical instability in the Middle East, but are offset by high dividend yields and low investment risks due to earnings growth. The biggest beneficiaries of the sanctions and currency depreciation have been domestic companies, particularly in sectors like food production, which have seen increased market share and higher prices. These companies, such as a shampoo maker and chocolate biscuits producer, may not be typical investments but have performed well in this unique market.
Focus on data quality and transparency in Iran's emerging market: Investing in Iran requires careful evaluation of data sources and potential fraud, but offers unique advantages like monthly sales data and lack of local analysis.
Investing in emerging markets like Iran requires a focus on data quality and transparency. While there are sources like Borzu, a local database in Iran, for financial data, it's important to remember that not all data should be taken at face value. Companies are required to report audited quarterly and annual reports, but investors should exercise caution due to potential fraud. However, there are unique advantages to investing in Iran, such as the availability of monthly sales data for most companies, which can help forecast quarterly earnings. Additionally, the lack of sophisticated analysis from local investors creates opportunities for professional investors to do their due diligence and build models based on the available data. Overall, while there are challenges to investing in Iran, the potential rewards make it an intriguing frontier market.
Navigating complexities in Iranian market for investors: Investing in Iran's complex market requires local insights and global expertise to navigate currency and fund transfer challenges. Principal Asset Management helps clients uncover opportunities despite risks.
For investors looking to engage with the Iranian market, currency exchange is less of a concern compared to transferring funds due to the limited number of banks with international connections. The Iranian currency market is complex, with multiple exchange rates, but the NEMA rate and bazaar rate have converged recently, making currency transactions more straightforward. However, the transfer of funds remains a significant challenge due to the sanctions and the limited number of banks willing to deal with Iranian institutions. Despite this, history shows that money will find a way to move through intermediaries when traditional channels are cut off. As a leading real estate manager, Principal Asset Management provides local insights and global expertise to help investors navigate complex markets like Iran. While there are risks, the firm's experienced teams are uniquely positioned to uncover compelling opportunities, giving clients an exclusive advantage. However, investing always involves risk, including the possibility of losing principal.
Decreasing effectiveness of sanctions on smaller financial transactions: The use of cryptocurrencies is making it harder for sanctions to limit financial transactions, especially on smaller levels. Iran and Venezuela are exploring the legalization of Bitcoin mining as a workaround. However, investing in Iranian companies comes with challenges due to lack of transparency and corporate governance.
The effectiveness of sanctions in limiting financial transactions, particularly on smaller transaction levels, has decreased in recent years due to the increasing use of cryptocurrencies. This trend is evident in countries like Iran and Venezuela, which are exploring the legalization of Bitcoin mining as a workaround. However, the lack of transparency and corporate governance in publicly listed Iranian companies poses challenges for investors. Valuation metrics like the payout ratio become crucial in assessing the actual earnings that make their way back to shareholders. During the escalation of tensions between the US and Iran, the Iranian stock market experienced significant volatility, with limit downs on the first trading day after the killing of Soleimani. Interestingly, half of the selling pressure came from inexperienced investors who had opened their first brokerage accounts within the last year. These observations underscore the importance of understanding the unique challenges and dynamics of investing in emerging markets.
Geopolitical tensions between Iran and the US could lead to diplomatic improvements: Despite initial market volatility, recent events between Iran and the US could potentially lead to diplomatic improvements and de-escalation, with signs of improving relations between Iran and Arab countries.
Despite significant geopolitical tensions between Iran and the US leading to substantial market volatility, the speaker believes that the situation could potentially lead to diplomatic improvements and de-escalation. The US's decision to assassinate an Iranian general and Iran's response with missile attacks on US military bases brought the two countries closer to a military conflict, but the speaker sees positive signs in Trump's post-event press conference, where he expressed openness to working with Iran on common targets and signaling peace with any nation seeking it. The speaker also notes that relations between Iran and Arab countries like Saudi Arabia and UAE have shown signs of improvement in the past six months. While it's uncertain if negotiations will restart or when, the speaker remains cautiously optimistic that this could be the best geopolitical year for Iran since 2016. Overall, the speaker views the recent events as potentially significant and positive, despite the initial market volatility.
Investing in Iran: Opportunities and Challenges: Lifting sanctions could lead to significant investment opportunities and earnings growth in Iran due to its large population and abundant resources. However, the complex legal and geopolitical landscape requires extensive research and compliance efforts, which could result in higher rewards for those willing to put in the work.
The integration of Iran into international financial markets, specifically its banking system, could lead to significant investment opportunities and earnings growth due to the country's large population and abundant resources. This scenario would only become a reality once sanctions are lifted, allowing for foreign capital inflows and potential upgrades to emerging market status. However, the complex legal and geopolitical landscape of investing in Iran requires extensive research and compliance efforts, which could result in higher rewards for those willing to put in the work. The historical examples of Russia, China, and other emerging markets suggest that such investments can lead to bubbles, but the potential for significant returns remains. Additionally, the notion that higher risk equals higher reward is not always true, and the ability to acquire valuable, hard-to-obtain information is a crucial factor in reaping rewards in the financial markets.
Understanding the complexities of investing in international markets: Accessing some international markets requires extensive research, connections, and resources
Accessibility plays a significant role in investing in international markets. While some markets, like the S&P 500, can be easily accessed through a simple ETF purchase, others require more effort and complications. For instance, investing in Brazil or markets with limited access may require more research, connections, and resources. The speaker expressed interest in exploring an Iranian Bloomberg esque data service to gain insights into such markets. Overall, the discussion underscores the importance of understanding the unique challenges and opportunities that come with investing in various international markets.
