'I think in the Iranian calendar year 1383 [which started on 20 March] Tepix growth will be 40-45 per cent,' says Albrecht Frischenschlager, director of investment and financial consulting at the local Atieh Bahar Consultants. 'The returns are still good given inflation and the exchange rate devaluation. There is still room for growth and there are not too many overvalued companies.'

Last summer a bull market was threatening to run out of hand, with prices spiralling upwards and growing fears that the Tehran Stock Exchange (TSE) would again form a bubble and crash as it did in 1993. But a cap on price fluctuation helped cool the market and since then a steady flow of new shares has been released - helping to quench Iran's newfound thirst for investment opportunities.

The next major listings that are expected will come in the cement industry, which already accounts for the highest proportion of TSE stock. Future plans to privatise banks and insurance companies are just as interesting to investors, if further away. The stocks of two already listed banks have performed very well over the past year and Frischenschlager says they are probably now overvalued.

The high oil price has helped lift market confidence, not least because of the large role of the Oil Stabilisation Fund in financing industrial expansion projects. If it stays high over the next few months, it should contribute to the expected seasonal summer bull run and help tide over the ensuing dip when the Iranian financial year ends in late September.

Proposed legislative changes are also planned to help increase the level of investment. An investment law has now gone before the Majlis (parliament) and is expected to be passed in the third quarter. The new law will create a supervisory body for the TSE and modernise brokerage systems.

It is also becoming easier for foreign investors to participate. A few are still in the market from before the 1993 crash, at which point fresh foreign investment in stocks was barred. Others now have to invest through Iranian funds or through the Kish Island Free Zone. More legislation enshrining foreign participation is now going through the official channels of approval and could arrive this year.

A strong example of the improving access is the Pars Investment Fund, set up in 2001 to promote and ease foreign investment into the TSE. It is preparing to go on line in the first quarter of 2005, providing two-stage internet transactions for Iranians living abroad and foreigners wanting to invest through Kish.