What It's Like To Be An Investor In Iran's Market Right Now

Tracy Alloway (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:15)

And I'm Joe Weisenthal.

Tracy Alloway (0:17)

So Joe, we had a pretty eventful week in markets recently.

Joe Weisenthal (0:22)

Yeah, pretty extraordinary start to the week, or really, I should say the start to 2020 The first trading day of the year was really strong, and then almost immediately thereafter, we got the news about the Iranian general being killed, and suddenly that has been the focus of markets in 2020, the repercussions of such.

Tracy Alloway (0:47)

So the Trump administration killed Iran's top general, Qassem Soleimani, and then that knocked markets immediately. But then a few days later, you had Iran retaliating against that killing by firing a series of missiles at US Iraqi air bases in Iraq, and that caused yet another sell-off. I think at one point, US equity futures were down something like 1.7% and we saw gold spike up to $1,600 per ounce. But did anyone ever stop to ask what was going on with Iranian stocks at that same time?

Joe Weisenthal (1:25)

I certainly did not stop to ask that question and I did not think about it for various reasons, which will get into one point that we should just make before moving on is that part of what's been interesting about US markets has been the degree of resilience. So even with all these headlines that totally caught people by surprise and we have markets near record highs, the volatility and the headlines haven't driven domestic US markets sustainably lower. In fact, as of this moment, they're basically at all time highs, yet again, quite surprising to some.

But you are totally right that there has been much less focus on regional stock markets, including the Tehran Stock Exchange, which exists, but which gets virtually zero discussion.

Tracy Alloway (2:17)

Well, I'm being somewhat facetious because I think everyone knows why we don't talk about Iranian stocks that much, and that's because of US sanctions, of course, and the fact that that particular market and economy and country really is cut off from large parts of the world.

But there is a Tehran stock exchange, there is a stock market, and I think it would be really, really interesting to find out exactly what happened in that market over the past week or so, and also just find out generally how it works. Not only do you have geopolitical risk, but you also have these really stringent sanctions.

Joe Weisenthal (2:54)

Yeah, no, I'm aware of the market exists, but I don't know anything about it. I don't know who can invest in it. I don't know how liquid it is.

I don't know how much retail participation or what are the big companies. I literally know nothing about the Tehran Stock Exchange.

Tracy Alloway (3:11)

Well, let's find out. We have the perfect guest to walk us through it. It's Maciej Wojtal, who runs the only European asset manager focused on Iranian stocks, a company called Amtilon Capital. Maciej, thank you so much for coming on.

Maciej Wojtal (3:26)

Hi, thank you for having me.

Tracy Alloway (3:29)

So I guess the obvious question to start out with is, how did you end up in this space? Because I don't think your name sounds very Iranian.

Maciej Wojtal (3:41)

Oh, no. Maciej is a typical Polish name. So I'm from Poland, raised in Warsaw, moved to London when I got my first job in JP Morgan, and I've been there ever since. And I had zero connection to Iran. So what caught my attention is obviously the Iran deal that was signed in 2015 and implemented in 2016 I also was just aware that there was a stock market in Iran because we used to run global equity long-short portfolios across developed and emerging markets. So including places like Kenya, Vietnam, China, Asia, a lot of different niche markets. And Iran was always there as something potentially interesting, but we couldn't touch it.

So no one did anything. And then when in 2016, the country opened up for, well, pretty much everyone except for US investors, I got interested, I did some research, I realized that there is a proper stock market. And this is what got me really excited because there is this huge potential growth story for Iran as a country of 83 million people, educated, young population with wages right now lower than in Vietnam, with diversified economy, with the largest oil and gas reserves in the world, but this is only 15% of GDP.

It's a good thing about being under sanctions for so long that they had to develop all the different sectors of the economy. But then for me as a portfolio investor, what was exciting is that there was a stock market with 600 stocks listed, $130 billion market cap, and daily liquidity of roughly $150 million per day on average.