Structure of the first and second ETFs to modify
TEHRAN – The head of the Securities and Exchange Organization (SEO) said that the structure and charter of the first and second exchange-traded funds (ETFs) will be changed.
Majid Eshqi said the two funds have become a problem in the capital market and have a special structure.
“If this structure is reformed, the price of these two funds could be closer to the net value of their assets,” he added.
Changes need to be made to the fund’s charter, the SEO chief said, adding that blanket approval has been received within that timeframe and the changes need to be submitted to the cabinet for approval.
“At the moment, the current price of these two funds is around 25% below their net asset value, which we don’t have like that among market funds,” Eshqi added.
According to Note 2 of the Budget Law of the past Iranian calendar year (ended March 20, 2021), the government is allowed to offer and sell its remaining shares in state-owned enterprises in the usual way or through the stock exchange. funds.
Following this legal capacity, at the beginning of the previous year, the cabinet authorized the Ministry of Finance and Economic Affairs to transfer the remaining shares of the state under three ETFs.
An ETF is an exchange-traded investment fund, much like stocks. An ETF holds assets such as stocks, commodities or bonds and usually operates with an arbitrage mechanism designed to keep it close to its net asset value, although deviations can sometimes occur.
In May 2020, the government sold shares in three banks and two insurance companies through the first exchange-traded fund (dubbed Dara First).
The banking ETF holds 17% government stake in Tejarat Bank, 17% in Bank Mellat, 18.32% in Bank Saderat Iran, 17.34% in Alborz Insurance Company and 11.44% in Amin Reinsurance Company.
Dara First, listed on the Tehran Stock Exchange, which is Iran’s main stock exchange, was the first fund in a series of three ETFs, through which shares of certain public organizations and companies are expected to be offered.
The stocks that will be offered through the mentioned Iranian ETFs belong to government bodies defined in Iran’s privatization program, a comprehensive plan seriously pursued by the government to downsize its workforce and reduce its role in the economy.
The second ETF (nicknamed First Refinery or Dara Second), which owns state shares in four major oil refining companies, namely Tehran Oil Refining Company, Isfahan Oil Refining Company, Tabriz Oil Refining Company and Bandar Abbas Oil Refining Company, was proposed at the end of August 2020.
The government owns 20% of the shares of each refinery.
He also plans to sell shares in giant auto and metals companies through a third ETF (dubbed Dara Third). The third fund is expected to hold 12.05% of the government’s shares in the National Iranian Copper Industry Company, 17.2% in Mobarakeh Steel Company, 14.04% in Iran Khodro and 23% in SAIPA (the two main national automakers) .