*Note: Data are based on the Iranian calendar year where each month ends approximately on 20th day of the corresponding month in the Western calendar year. Month's numbers for these data are converted to the closest western month only for convenience. (The current year of the Iranian calendar starts from March 21).
Inflation and Exchange Rate
Despite the increased rates of foreign currency and housing sector in recent months, the monthly inflation rate is still below 1%, a situation which is less likely to last. An indication of this is the producer inflation’s move up to double-digit inflation in February 2018 which is a prospective variable in inflation calculations.
Also, among the other causes of discontinued monthly inflation growth is policies of the government on control of price of products (medicine, transportation cost, some foods, etc.) by March 20, 2018. However, concurrent with start of the new year, the prices are expected to advance and affect the inflation. Accordingly, the inflation rate is projected to increase in the coming months.
Following months of attempts by CBI and Ministry of Economic Affairs and Finance to control the interest rate, the foreign currency volatilities made the governmental bodies to adopt policies including increase of CDs rate to 20% from 15%. 2,400 thousand billion IR Rials were absorbed by these bonds in two weeks putting extra pressure on the fixed income funds to redeem the units. The interest rate in the next six months, i.e. maturity for the deposits of September 2017, is expected to stay at over 20%.
The CBI’s policy in increase of CDs rates pays to think since going over the balance of payments indicates that despite the positive trade balance of 20 B USD (from oil and non-oil exports), the negative trade balance of 6 B USD from services sector (esp. tourism) and 18 B USD from capital outflow and other negative factors have caused the negative trade balance of 7.6 B USD in 2016 and 5.5 B USD in six months through September 2017. All this demonstrates that the increased interest rate may not necessarily settle the problem of foreign currency excess demand.
 Certificate of Deposit
The maturity of the facilities granted by Maskan Bank together with the increasing concerns on inflation rise under dollar appreciation caused both the number of transactions and the prices of housing sector to go up. However, this rise is expected to lose its momentum and go ahead with a slight slope along with the other economic variables such as inflation and foreign currency rates, following CBI’s measures in increase of the interest rate and control of foreign currency fluctuations
* Based on CBI’s latest report on Tehran housing sector.
The increased foreign currency rates over the recent months has been a driving factor for export to send it over 6 B USD i.e. the 37-month high in monthly export area. In case of foreign currency stability at current rates, the imports can be controlled in the coming months.
Increased export has brought about a trade balance surplus of 1235 M USD which is its 19-month high. Nevertheless, on account of foreign currency rate stability in six months through September 2017, the 11-month cumulative trade balance stood at 4.5 B USD which is expected to advance in the months ahead.
As happens almost every year in two ending months, the capital market suffers from shortage of cash driven by individual and institutional cash demands. Amid this, measures of Ministry of Economic Affairs and Finance to increase the interest rate from 16% to over 20% put extra pressure on the capital market causing a negative return of 0.7% after months of experiencing an ascending trend. However, given the higher foreign currency rates and stability in global prices, the profitability of companies witnesses a satisfying situation and no serious drop is expected in this connection
Assets' Returns (1 Year, Trailing)
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