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Iran will get its first index exchange-traded fund tomorrow with the instruments creator betting on growing foreign demand for the nations stocks as it nears a deal to end sanctions over its nuclear program.

Turquoise Partners Group secured regulatory approvals for the Turquoise TSE 30 Iran Index ETF, which will mirror the TSE 30 Index of the biggest stocks by market value on the Iranian bourse, the company said yesterday by e-mail. Fundraising will start on Jan. 27 and the ETF will be listed on Irans main equities market, according to the e-mail.

While foreigners can invest in Iranian stocks, international sanctions hinder the process of transferring money and deter institutional funds, according to Charles Robertson, the London-based chief economist at Renaissance Capital Ltd. Iran reached an interim deal in late 2013 with global powers, yet in November negotiations were extended to July after both sides failed to come to a comprehensive agreement.

Once sanctions on Iran are lifted -- which might begin as early as 2015 -- we could see a flood of money pour into this market, Robertson said by e-mail. ETFs are an increasingly popular means of accessing markets, but with the inherent constraint, the winning companies or sectors do not get the attention that an active fund manager would focus on.

The Tehran Stock Exchange lost 21 percent in 2014, the first yearly decline since 2008. Stocks extended the drop this year, retreating 5.6 percent in January as Republicans and some Democrats in Congress seek new economic and diplomatic penalties on Iran, a move that could quash any nuclear deal. The index was little changed today at 65,114.1, bourse data show.

Penalties on crude exports, the Islamic republics main export earner, were eased in 2013 in exchange for caps on its nuclear work. Brent crude slumped 48 percent last year, the most since 2008, as growing U.S. production added to a global supply glut.

Turquoise expects foreign inflows to accelerate amid bets President Hassan Rouhani will bring an end to decade-long sanctions over the nations nuclear program that have throttled its $366 billion economy and curbed foreign investment.

Our aim is to create different types of investment instruments for a variety of investor appetites, Turquoise Chief Executive Officer Ramin Rabii said in the e-mail from Tehran. There has always been a demand from local and foreign investors to trade the Iranian market index, which we tried to address with this fund.

To contact the reporter on this story: Zahra Hankir in London at zhankir@bloomberg.net

To contact the editors responsible for this story: Daliah Merzaban at dmerzaban@bloomberg.net Matthew Brown, Chris Kirkham

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Iran Stock ETF Aims to Lure Foreigners Amid Nuclear Talks