The government holds an eye on foreign investments to boost capital market. Iran’s economy faced with alarming statistics last year. Economic growth reached - ۵%. Inflation rate also, surpassed ۳۴% to the end of the year. The government set goals for positive economic growth and an inflation of less than % ۲۵ by the end of ۱۳۹۳(March ۲۰۱۴).
The pivotal role of capital market to finance activities of economic establishments and the government budget is pinpointed in this document. This is because the government and many of these establishments are in financial dire straits. Therefore, one big requirement of the country's economy is to finance businesses and the government with a non-inflationary solution. This will help the economy go back in motion and a non-inflationary way out from recession is made possible. And herein, the capital market bears an ever-increasingly important role.
With this in mind and based on policies to get out of economic recession in 2014, the government has made a series of policies to regulate and develop the securities and mercantile exchange market. One of the policies in this package is attracting foreign investment in securities exchange. Foreign investment is the link to connect domestic and global economy resulting in capital, technology and expertise to flow into the country.
Boosting foreigners' presence in domestic economy can also lower the risk of economic sanctions. However, foreign investors are banned to strike a deal with Iran before nuclear talks come to a conclusion. They are alarmed of sanction in case they proceed to invest in Iran without Geneva Agreement to bear results. But despite all the restrictions, there have been an immense number of business talks which represents increasing tendency towards investment in Iran.
As for investment sector in Iran's capital market, managing director of Central Depository reported of 37 trading code release in the first four months of the year demonstrating a rise four times as much compared with the same time last year. Nevertheless, according to Stock Exchange President, foreign investment in Iran's stock market reaches less than 10,000 billion Rials.
Obviously, Tehran's stock exchange with its more than 100% turnover rate has drawn attention of many foreign investors. Foreign investors however, would first investigate political, economic, legal and cultural factors in the target country and then proceed to gather information regarding the market. Added to the stability and transparency of abovementioned macroeconomic factors, it is required to enhance the structure to release financial information and introduce investment opportunities specifically in English to draw foreign investment. For instance, capital market should strongly move to an international financial report that follows IFRS.
The question is while there are few shares over 1 dollar in stock market, in case of million-dollar investments, how would security market absorb them without leading to economic bubble? Also legally speaking, according to Foreign Investment Statute in the country's Stock Exchange, foreign investment is considered as one of the ways to invest in economy.