Trusted Sources is the first independent research house to introduce in-depth analysis of the Iranian equities market. We cover political developments, economic reforms and the legal environment, as well as Iran’s most investible sectors – petrochemicals, metals and mining, financials, consumer goods, telecoms and tech. Our goal is to dig deep into the Iran story, providing investors with hard facts and a nuanced understanding of Iran’s complex political and economic environment.

Over the next few years Iran will offer exciting opportunities for both portfolio and strategic investors. The Rouhani administration has embarked on an ambitious reform programme, which includes macroeconomic stabilization, privatization and integration into the global economy. Contrary to what is maintained in some media reports, these reforms are backed by a broad political consensus. Iran has valuable assets – abundant natural resources, a young and well-educated population, a large middle class, a unified nation-state and proximity to the world’s most important trading routes – but has suffered from sanctions and socialist policies. Liberalizing reforms will enable the economy to finally leverage its assets and generate sustained GDP growth.

There are, however, limits to what is achievable in Iran – just as there proved to be limits to Russia’s and China’s reforms. Although Iran is becoming less authoritarian, full-fledged democratization is unlikely. State intervention in the economy, mainly through price controls, is deeply entrenched. At the moment, a degree of state planning is seen as necessary in order to diversify the economy and reduce Iran’s dependence on oil exports. But there is a risk that uncompetitive industries will be kept afloat with subsidies and excess capacity will develop in some sectors.

Iran faces challenges in terms of governance and rule of law as well. The equities market is well regulated and Iranian companies are much more transparent than are Russian and Chinese companies, even today. Foreign investors enjoy substantial legal protection. But the judiciary is politicized and it is unclear how vigorously investors’ rights will be enforced. Nor is there a level playing field in Iran: the security services and religious foundations are major asset owners and they enjoy considerable privileges.

Compromises will need to be made between reformers, hardliners and vested interests, and the end result is likely to be a hybrid economy that combines features of both free markets and statist systems. Hybrid models, as we know from Russia and China, pose elevated political risks, especially in state-dominated sectors. Iran, however, will reward the careful stock-picker, as genuinely competitive companies will be able to prosper and gain market share. One or two of Iran’s largest companies could even acquire world-class status akin to that of SABIC, Sinopec and Gazprom.

Trusted Sources’ approach is to rely on first-hand, on-the- ground knowledge of Iran through regular analyst trips, company meetings, personal contacts and use of primary sources, such as company reports and government databases. Our analyst has already travelled to Iran five times over the past year and has established relationships with more than a dozen companies and policymakers. As in the case of the other markets covered by TS, we will focus on the interaction between politics and economics, with an emphasis on identifying specific risks and opportunities for investors in Iran.