IRAN - July 6 - Tehran Stock Market Opening To Foreign Investors.

The Tehran Stock Exchange (TSE) will soon open its doors to foreign investors with the announcement of new regulations, according to new TSE bylaws. The medium-term aim is to open 5% of the market's total capitalisation to foreign investors, but in the first year the cap will be set at 0.5%. This would make just $45m of the current market valuation of about 72,000 bn rials ($9 bn). Holdings in individual companies will be limited to 10% or up to 49% with special permission. The TSE, established in 1966, has risen in tandem with world oil prices. The all-share Tepix index rose 45% last year and has gained a further 17% in the first half of 2001. Trading volume this year is up by nearly 50%, but the daily average is still only about $8m. Foreign investors would also have made a currency gain in 2000, as the rial strengthened by about 5% against the dollar. At least three foreign investment funds focusing on Iran are in the process of being established. (But trading is dominated by quasi-official investment funds that soak up shares of newly privatised companies. Price movements are as extreme as the transparency in some companies is limited. Insider trading is the norm. More than 300 companies are listed on the TSE, but analysts say only 30 are traded daily and about a dozen are effectively bankrupt. The FT quotes Rahim Falsafi, a retired scientist who dabbles on the market, as describing his fellow Iranian punters as "a bunch of uneducated speculators". He adds: "People are different here. The usual laws of economics don't apply because Iranians always think in the short term and are after a quick profit". Despite the general malaise of the economy - Pres. Khatami famously described it as "sick" - there is still a lot of cash chasing a home, if it is not moving out of the country. An issue of government bonds totalling 1,000 bn rials was sold out on the first day this week. The four-year bearer bonds carry a coupon of 17% and can be redeemed at any time. The issue was so successful that a second tranche of 500 bn rials was made).