Years of economic sanctions and isolation have ravaged Iran's economy but created one of the last unexploited opportunities for international portfolio investors, who could start moving their money in this year if geopolitics permit.
The Tehran Stock Exchange is "the last, large untapped emerging market in the world", said Ramin Rabii, managing director of Turquoise Partners, a Tehran-based investment firm with around $200 million of assets under management.
Talks between Iran and world powers in Vienna this week aim to reach a deal on Tehran's disputed nuclear program. Iranian President Hassan Rouhani said on Monday agreement was "certain", though not necessarily before a self-imposed Nov. 24 deadline.
A deal would pave the way for the West to lift sanctions that have largely frozen Iran out of the global banking system, deterring the vast majority of foreign investors.
Those investors are expected to pour billions of dollars into Iran's economy in the event of a nuclear deal, but negotiating contracts and obtaining licenses for business ventures and factories could take many months.
So the fastest way to gain exposure to the Iranian economy may be the stock market - a prospect for which many foreign funds have started to prepare.
"From 2011 to 2013, we used to get one email of interest from potential investors every two to three months," Rabii, whose firm is one of the main channels for foreign portfolio investment in Iran, said in a telephone interview at the Reuters Middle East Investment Summit.
"Now we are getting a few dozen emails every month and more important than that, serious investors have come and visited us. Turquoise has hosted more than 65 investors since January this year in Tehran."
Investing in Iran will remain a risky business for years to come. Even if a nuclear deal is reached, Rouhani will have to grapple with hardline political rivals as he tries to push through sensitive social and economic reforms.
After shrinking in the past two years, the economy has resumed growing slowly, and inflation has come down near 20 percent from over 40 percent last year. But the scars of sanctions include high unemployment and poor infrastructure.
The government’s presence is felt in almost every area of the economy, from regulation of prices to restrictions on exports - partly the result of the "resistance economy" which Iran established to withstand the sanctions.
"Foreign investors may see government interference in the economy as the biggest risk in the market," Rabii said.
But the flip side of those issues is that the market, which has a capitalization of about $120 billion at the official rial exchange rate, roughly the same as Dubai's, is by some measures one of the most attractively valued in the world.
The market's main index soared 136 percent in local currency terms last year, partly because the election of Rouhani fanned hopes for a nuclear deal. It is down 18 percent year-to-date as authorities tighten monetary policy to curb inflation.
Rabii estimated the market was now trading at about 5-1/2 times this year's projected earnings - well below about 11 times for MSCI's frontier market index - and carried a dividend yield of around 15 percent, roughly three times most markets.
Potential headaches for foreign investors in the market include red tape, the lack of international custodian banks, and low liquidity, which can make it hard to get into and out of stocks, Rabii said; collecting dividends can be difficult.
But he noted that the market had become more sophisticated over the past 10 years, despite sanctions. Fifteen years ago, for example, corporate earnings were announced on pieces of paper pinned to a wall of the exchange; now they’re distributed via a centralized online system.
While most of the big listed companies are still controlled by state-linked institutions such as pension and social security funds and various foundations, private investors have started to make their voices heard, Rabii said - managements can face tough questioning by shareholders at annual general meetings.
In fact, the transfer of more of Iran's corporate wealth into private hands may be one of the most lucrative trends for the stock market in the next few years.
Iran revived its privatization program in 2006 and over 15 of the 30 biggest firms on the exchange have listed since then. But the financial power of state-linked bodies meant they were able to buy up most of the shares on offer, leaving the free floats of top firms very small at around 5 to 10 percent.
Financial pressures on government-related bodies have now increased and the Rouhani administration has said it wants the private sector to play a bigger role in the economy.
As foreign investors enter Iran in coming years, there may be a “second wave of privatization” as state-linked funds facing liquidity pressure sell large stakes in major companies to private investors, Rabii said.
“If there’s a buyer for such stakes, I am certain to find a seller.”
The experience of other markets suggests fresh flows of foreign money into Iran's bourse could eventually total tens of billions of dollars. Foreigners own 20 or 30 percent of some emerging markets; Rabii estimated they now held less than 0.5 percent of Iranian stocks.
It is likely to take years to close this gap, however. Even if a nuclear deal is reached next month, banking ties with the outside world will take months to be re-established, and many banks and investors will be very cautious at first.
"Even if sanctions are lifted tomorrow, I don’t think we can look for a flood of money into Iran tomorrow,” Rabii said, suggesting a few hundred million dollars of foreign money might enter in the first 12 months.
Large inflows of funds might take two years to appear, as big international banks rebuild ties with Iran.
Turquoise, founded in 2005, says it has about $70 million of foreign money and $130 million of local funds under management. It started as asset management company and has expanded into the brokerage business and private equity, increasing its group-wide staff to over 70 people.
Soon after Turquoise was established, Mahmoud Ahmadinejad was elected as president of Iran and inflows of foreign money began to dry up, so the company was forced to focus on domestic investors. A plunge of the rial against the U.S. dollar in 2012 - it lost two-thirds of its value over 18 months - put severe pressure on Turquoise.
Rabii, 35, was born and grew up in Iran; his family moved to Canada when he was a teenager. He studied at a boarding school in Switzerland and at SOAS, University of London.
After working briefly as a consultant in London, he moved to Tehran and chose a career there partly, he says, out of patriotism, partly out of a sense of Iran’s potential, and partly because of the chance to create something new.
“We have continued to hope for an upturn - and when the market opens up, it will be the largest opening up of a market in recent times. This has kept us going.”
(Reporting by Andrew Torchia; Editing by Olzhas Auyezov)