Taghavi: Iran Bank Melli Fund May Get Boost

• To: weblogs@xxxxxxxxxxxxxxxxxxxxxxxxx
• Subject: Taghavi: Iran Bank Melli Fund May Get Boost
• From: Mohsen Banan-Public <public@xxxxxxxxxxxxxxxxxxxxxxxxx>
• Date: Thu, 26 Feb 2009 16:13:59 -0800
• Content-type: text/plain; charset=us-ascii

26 Feb 2009 10:14 IST

Iran Bank Melli Fund May Get Boost From Better US-Iran Ties
 By Roshanak Taghavi
 Of DOW JONES NEWSWIRES
TEHRAN (Dow Jones)--Mehr Cayman, an affiliate of Iran's state-run
BankMelli, plans to raise more money for an investment fund that
targetsIranian stocks if relations between Tehran and Washington
improve afterIran's June 12 presidential elections, its managing
director said.
"It's a contingent plan," Stephen Austen, who owns 50% of Mehr Cayman
andcontrols the First Persia Equity Fund, told Dow Jones Newswires in
arecent interview in Tehran.
The First Persia Equity Fund invests solely in stocks listed on the
TehranStock Exchange, or TSE, and raised EUR66 million in two stages
in 2007 and2008, Austen said.
The fund fell short of meeting its initial goal of raising EUR250
millionbut Austen said a possible reduction in tensions between
Washington andTehran, and a more investor-friendly environment after
Iran's upcomingpresidential elections may allow for a third
fund-raising round.
"What's holding back (investors) is the lack of clarity at this point
inwhere Iran is headed, where the government is headed and where the
economyis headed," he said.
SANCTIONS
In response to Tehran's controversial nuclear power program, the EU
andthe U.K. imposed sanctions on Bank Melli on June 23 last year --
five daysafter First Persia's second fund-raising -- to freeze any of
the lender'sassets held under EU and U.K. jurisdiction.
The European sanctions make illegal all financial dealings with Bank
Melliunder EU and U.K. jurisdiction, including any territorial
dependencies.
The U.S. tightened financial sanctions against Iran in 2007, also over
theIslamic republic's nuclear ambitions.
Austen said U.S. sanctions haven't had as much impact as sanctions
againstBank Melli in Europe, the fund's "natural investor base."
Though the U.K. has since issued a government ruling legalizing any
financial dealings with the fund, its association with Bank Melli has
madeit difficult for Mehr Cayman "to satisfy compliance departments,"
Austensaid, adding that Mehr kept its auditors but had to change its
bank twice and administrator once since the first fund-raising.
"Being in regulatory compliance and being politically acceptable in
acompliance department are two different things," he said.
International political tension and sanctions over Iran's nuclear
energy program also helped create a negative "brand name" for the
Islamic republic that has been difficult to sell, Austen added.
"The U.S. government worked quite hard to put out the message that
they would disapprove of people investing in our fund. That limited
our access to subscription," he said.
Iran's rising inflation rate and the government's overspending on
populistsocial policies rather than essential industrial investments
has also created a discouraging economic environment for potential
investors, headded.
Despite the economic and political uncertainty associated with Iran,
thefund, which fell 4.7% in 2008, including payment of a 10% cash
dividend, outperformed Iran's main TEPIX index, the MSCI Emerging
Market Index and the MSCI Arabian Market Index.
"The Iranian currency has been supported with oil revenues, (so)
almost any investment in Iran over the last five years has done
great. In dollar terms, they've done phenomenally," said Hossein
Askari, an economist at George Washington University, who has advised
governments in the Persian Gulf.
Austen said the fund's investment philosophy is based on a "search for
pricing power" and invests in sectors such as private banks, mining
companies and petrochemical companies, which enjoy minimal government
intervention in their pricing and cost structures.
First Persia's largest holdings are in Eghtesad-Novin Bank, Isfahan
Oil Refining Co., Fanavaran Petrochemical Co., National Iranian Copper
Industries Co. and Telecommunication Co. of Iran.
BRANDING
"Most of our money comes from professional pension funds and emerging
market specialist fund managers in western Europe, including a
regional government pension fund," Austen said, adding that investors
from Nordic countries, Singapore and Switzerland, and a United Arab
Emiratesinstitution and a Saudi individual, are also on the list.
Austen hopes to tap new investors, including European pension funds,
Swissprivate fund management companies, U.K. emerging market fund
managers,Arab sovereign wealth funds, and Asian investors in China,
Malaysia andSingapore for First Persia's next fundraising.
Apart from an improved political development, much will also depend on
aworld economic recovery, renewed investor appetite for risk and an
oilprice increase by 50-100%, Austen said.
Iran's privatization program and newly proposed legislation to
eliminatefuel, water and electricity subsidies are signs of a
progressive "dynamic"in Iran's economy that is "irreversible" and
reflect the start of arestructuring in Iran's economy, he said.
However, according to Askari, the current global flight from risk
meansinvestors will hesitate to invest in Iran for at least the next
two years.Since oil revenues support the Iranian rial, Iran will start
to depleteits financial reserves if crude prices -- presently hovering
around the$40 a barrel mark -- remain at current levels for the next
one to twoyears.
"In Iran, there is a great deal of risk, especially risks over
substantialexchange rate movement. Things will get much worse unless
oil prices moveback up," Askari said.
-By Roshanak Taghavi, Dow Jones Newswires

• Prev by Date: Recognition of NOROOZ By the Canadian Government
• Next by Date: The Man Who Changed The World
• Previous by thread: Recognition of NOROOZ By the Canadian Government
• Next by thread: The Man Who Changed The World
• Index(es):
  • Date
  • Thread

Main Index | Thread Index