* Equities index soars 18.3 percent in past four weeks* Auto sector leads, pharma and engineering also strongBy Andrew Torchia
* Risks include banking debt, delay to economic reforms
* But valuations still cheap by international standards
* Falling deposit rates may push more money into bourse
DUBAI, Feb 14 A leap by the Tehran stock market in the past four weeks contrasts with gloom in many bourses around the world and hints at Iran's investment potential as its economy, long isolated by sanctions, rejoins the global trading system.
The TEDPIX index has soared 18.3 percent since Jan. 16, when the sanctions were lifted after an international deal on Iran's nuclear programme. Average daily trading turnover has tripled from last year to around $150 million.
The economy is still struggling - growth is close to zero, the jobless rate exceeds 10 percent and many banks face mountains of bad debt. Political tensions between hardliners and moderates could slow efforts to address these problems.
As a result, some commentators are warning that the notoriously volatile market may not hold on to its gains.
"The Tehran bourse is disregarding warnings and the condition of world markets ... It is going down the same road as in 2015, the result of which will only be a lack of confidence and the flight of capital from this market," the conservative Nassim news agency said in a commentary last week.
But many investors are betting that by restoring Iran's links with the rest of the world and attracting foreign capital and technology, the end of sanctions will trigger a long-term economic boom.
"The actual benefits of the lifting of sanctions will take six to 12 months to start to feed into companies' financials," said Payam Malayeri, head of asset management at Griffon Capital, a Tehran-based firm which last month launched an offshore equity fund focused on Iran.
"Investors are discounting that now - they are looking ahead to corporate earnings growth in 2017 and 2018."TEDPIX, Feb. 17: 77888.2 up 746.60 (+0.97%)
Some economists think Iran's gross domestic product could grow 5 to 6 percent annually in the next several years. That would boost corporate earnings 15-25 percent a year, Malayeri estimated. Also, dividend yields are high at around 12 percent....MORE