International entrepreneurs are eyeing Iran as the most important market opening up to major equity investors.
“An economy bigger than Thailand’s and oil reserves rivaling those of Canada” is how investment bank Renaissance Capital sees the country.
Officials from Iran and P5+1 sealed a historic accord on Tuesday, which will see all sanctions by the US, UN and Europe on the country lifted.
Renaissance sees the Islamic Republic’s stock market opening to investors in early 2016, with inflows totaling $1 billion in the first year.
“We are confident that Iran opening up will be one of the most interesting and positive developments for the emerging and frontier market asset class in many years,” Renaissance’s Charles Robertson and Daniel Salter wrote.
“Iran is the largest and most important economy in our view that is still closed to institutional investors.”
Iran’s stock market has been one of the best performing in the Middle East even under crippling US-led sanctions. Over 450 companies listed on the Tehran exchanges have a combined capitalization of more than 3,644 trillion rials ($110.5 billion). In 2014, Tehran Stock Exchange’s All-Share Price Index TEPIX rose a record 130%.
According to Emirates NBD PJSC, Dubai’s biggest bank, Iran’s growth is set to accelerate from 2016, with gross domestic product expanding 7.9%.
The accord will have “significant implications for both the Iranian economy and global energy markets”, economists Khatija Haque and Jean Paul Pigat wrote.
“The impact on domestic consumption, investment and trade in Iran would be enormous.”
Iran has a diversified economy. Unlike many emerging market frontier countries, it is not saddled with a massive public debt.
The country has an educated population of around 80 million and a GDP of $419 billion, with a market capitalization size of $170 billion.