Iran possibly the next Turkey, says RAM’s Aziz Unan

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It may take time, but factors speak for Iran potentially taking on a role in future that is currently being held by Turkey for emerging and frontier market investors, according to comments from Aziz Unan, manager of the RenAsset Management Eastern Europe and Ottoman funds.

Speaking at the recent InvestmentEurope Pan-European Fund Selector Summit in Lausanne, Unan noted how the focus of emerging market investors in the Europe and Middle East area had shifted over the past couple of decades.

In the 1990s investors were focused on the Central Europe story, before shifting to Russia in the 2000s. The next decade looks like being Turkey’s Unan argues on the basis of its integration into surrounding economies and its emergence as an energy hub.

In particular, gas shipments from Russia across pipelines under the Black Sea are set to hit land in Turkey before going on towards Greece and the Balkans. However, shipments will also run through the country from Azerbaijan and Iran – the latter’s shipments of gas to Europe through Turkey could soar depending on how sanctions are eased in coming years.

This brings up the arguments that suggest Iran could be the next big frontier opportunity for investors.

Unan points to favourable demographics, an educated labour force, pent up domestic demand, and high levels of natural resources.

Estimates currently put the country on 9.4% of proven crude oil reserves globally, and 17.3% of proven reserves of natural gas.

Currently the GDP per capita is about half that of Turkey – but Turkey’s has increased significantly in the past decade, suggesting a model that could be followed.

Investments in Iran are likely to focus on equity. With relatively low levels of debt, it is less certain that any meaningful fixed income market will develop.

Currency and inflation are challenges to investors now, but the picture would change dramatically were sanctions to be eased. For example, that would have a significant impact on the spread between black market rates for currency and the official exchange rate versus hard currency.

If inflation were to fall over the coming 5-10 years, that would buck the expected trend in the West, where inflation is expected to rise from its current historically low levels.

Unan says further that there is an argument currency reserves could increase in Iran as investments come into the country – again, subject to changes in the sanctions regime – which could lead investors to see the market as an inflation hedge to European markets.

Also interesting, Unan adds, is the position of Iran versus Saudi Arabia. The picture generally is that Iran itself is not putting up significant barriers, but it is external barriers to investors, such as sanctions, that are hindering direct investments into the country’s stock market.

In contrast, while many investors have sought to access Saudi Arabia’s markets, the country has put up barriers to those from outside.

For investors in Iran it is therefore currently a challenge. However, focusing back on Turkey, Unan finds that there are many companies that could benefit from a lifting of sanctions, in sectors such as telecoms, financials, and automobile production.





Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 17 years he has been based in London writing about funds and investments. From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope. Jonathan was awarded Editor of the Year at the Professional Publishers Association (PPA) Independent Publisher Awards 2017. Shortlisted for the same in 2016, he was also shortlisted in 2017 and 2015 for the broader PPA Awards category Editor of the Year (Business Media).

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