FEDERATION OF EURO-ASIAN STOCK EXCHANGES
ANNUAL REPORT APRIL 2009
ISTANBUL STOCK EXCHANGE
Gradual recovery expected, while worries
continue.
Huseyin Erkan
Chairman & CEO
The global economy seems to stand at a
difficult point, where demand slows sharply in
most developed economies and inflation rises
all over the world, but particularly in developing
countries. Global growth, which continued
robustly in the last four years, slowed
significantly in the second half of 2008, before
the expected gradual recovery in 2009. In
developed countries, business and consumer
sentiment have continued to retreat, while
industrial production has weakened further.
On the other hand, there have been signs of
weakening business activity in emerging
economies as well. Risks related to global
imbalances, such as the continuing decline of
the US Dollar and slower growth of the US
economy, and rising international oil prices, still
lead to worries.
It is worth noting that, in spite of the global
slowdown, rising energy and commodity prices
have boosted inflationary pressure especially in
the developing countries. Oil prices have risen
significantly, driven by supply concerns, while
HISTORY AND DEVELOPMENT
In 1981, the Capital Market Law was enacted and
one year later, the Capital Markets Board was
established. In October 1983, the Parliament
approved the Regulations for the Establishment
and Operations of Securities Exchanges, which
paved the way for the establishment of the ISE,
formally inaugurated in 1985.
Currently, there are three markets operating at the
ISE; the Stock Market, the Bonds and Bills Market
and the Foreign Securities Market.
The ISE provides a fair and transparent
environment for trading of a wide variety of
securities namely, stocks, exchange traded funds,
government bonds, Treasury bills, money market
instruments (repo/reverse repo), corporate bonds
and foreign securities.
In 1989, the foreign exchange regime was
amended to allow non-residents to invest in
Turkish securities, making the Turkish stock and
bond markets open to foreign investors without
any restrictions on the repatriation of capital and
profits.
The ISE was recognized as a “Designated
Offshore Securities Market” by the U.S. Securities
and Exchange Commission in 1993 and was
designated as an “appropriate foreign investment
market for private and institutional Japanese
investors” by the Japan Securities Dealers
Association in 1995. Likewise, the ISE has been
approved by the Austrian Ministry of Finance as a
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food prices have increased due to adverse
weather conditions.
Against this background, the top priority for
policymakers is to head off rising inflationary
pressure, while also holding risks to growth
under control. In many emerging economies
tighter monetary policy and greater fiscal
restraints are required, which, in some cases,
is combined with more flexible exchange rate
management. In major developed economies,
on the other hand, monetary tightening is less
imposing since inflation expectations and labor
costs are projected to remain well anchored
while growth weakens noticeably, but inflation
pressures still need to be monitored cautiously.
Not surprisingly, financial market conditions are
not very favorable, and the Istanbul Stock
Exchange has got its share. The ISE National-
100 Index, the main indicator of the ISE,
decreased by 63% in US$ terms in 2008. The
Stock Market total traded value maintained
stood at US$ 261 billion, registering a relatively
regulated market in accordance with the
regulations of the Austrian Investment Fund Act in
2000.
As a result of all these developments, foreign
investors now account for a substantial volume of
daily trading and hold around 67.5% of the
publicly-held stocks in their portfolios.
The ISE currently owns 32.63% of the ISE
Settlement and Custody Bank, 30% of the Central
Registry Agency and 18% of the Turkish
Derivatives Exchange. On the international level,
the ISE has participations in the Kyrgyz Stock
Exchange and Baku Stock Exchange with stakes
of 24.5% and 5.55%, respectively.
FUTURE OUTLOOK
• The ISE aims to establish a technology centre,
which will facilitate the efficient functioning of
capital markets in Turkey. The technology centre
will provide a common technological base for cash
and derivatives markets, integrate risk
management-surveillance system and centralize
collateral management at the ISE Settlement and
Custody Bank Inc. Within this context, the ISE will
develop an efficient network through which all
capital markets institutions will communicate with
each other and increase the total liquidity in its
markets, reinforce the ISE’s competitive strength
and develop a structure that will position the ISE in
the region as an international hub and reduce the
overall transaction costs in its market.
• The ISE plans to establish new markets in 2009,
namely; “Derivatives Market” which will provide
small decrease of 13% compared to 2007. The
average daily traded value was US$ 1 billion
during the same period.
As of end 2008, 317 companies and 9 ETF’s
are traded on the Istanbul Stock Exchange.
The market capitalization of the ISE declined by
59% compared to end-2007, dropping to US$
120 billion.
The share of foreign portfolio investors in the
free-floating shares of the ISE stood at 72% as
of end-2007 while this decreased only slightly
to 70% as of end-2008.
The average daily trading volume on the ISE
Bonds and Bills Market, on the other hand,
registered an increase of 11% in 2008. The
daily average trading volume of the Outright
Purchases and Sales Market decreased by
13.8% to US$ 954 million, while the average
daily trading volume of the Repo/Reverse Repo
Market showed an increase by 14.5% to reach
US$ 9,060 as end-2008.
trading in derivatives instruments and “Small and
Medium Sized Companies Market” to enable small
and medium sized companies with growth
potential to raise capital through offering their
stocks to the public. The introduction of Derivatives
Market is expected to increase the liquidity and
depth of the underlying securities in the spot
market and therefore, to reduce volatility.
• The ISE will continue to work towards increasing
the number of public offerings through a number
of activities in 2009. A series of seminars and
private meetings are planned to be organized
across the country in cooperation with the local
Chambers of Commerce and/or Industry with a
view to raising awareness among the companies
about public offerings; including its benefits and
procedures. At the second stage, consultancy
units will be established within the Chambers of
Commerce and/or Industry of every city, which will
inform the companies on public offerings on a
free-of-charge basis. The staff of these units will be
trained by the Istanbul Stock Exchange.
• The ISE is working towards trading of warrants in
coordination with the Capital Markets Board (CMB)
of Turkey. Within this framework, the CMB will
regulate warrant trading and the ISE will determine
the listing and trading principles.
• The Istanbul Stock Exchange, as the coordinator
of the Organization of Islamic Conference (OIC)
Member States’ Stock Exchanges Forum, which is
a platform to reinforce the cooperation among the
participating stock exchanges, will host the third
Forum Meeting during the second half of 2009.